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FIN 500 WeekSeven Homework

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Question;Work should;be done individually.Word-process your solutions;within this template and show all steps used in arriving at the final answers.;Incomplete solutions will receive partial credit. Copy and paste all necessary;data and create tables as needed.?;Problem 1;Suppose a dividend of $1.25 was;paid. The stock has a required rate of return of 11.2% and investors expect the;dividend to grow at a constant rate of 10%. Complete parts (a) through (e);below.;a) Compute D0, D1, D2,D3;and D7.;b) Compute the present value of the dividends for;t = 3 years.;c) Compute the current market price.;Problem 2;Suppose a dividend that pays at;$1.07 has a growth rate of 20% for the first 3 years. After the 3 years, there;is a long-run growth rate of 8%. The stock has a required rate of return of;12.4%. Find the current market price of a share of common stock.;Problem 3;Assume the beta coefficient for;a company?s stock is?= 0.2, the risk-free rate of return, rRF, is 8% and the;required rate of return on the market, rM, is 14%. Assume the;dividend expected during the coming year is D1 = $2.50 and the;growth rate is a constant 7%. Compute the price at which the company?s stock;should sell.;Problem 4;A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs;= 10.5%, and the expected constant growth rate is g = 6.4%. What is the stock's current price?

 

Paper#51294 | Written in 18-Jul-2015

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