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finance question




Question;1-2) Common stock value Zero growth Kelsey Drums, Inc., is;a well- established supplier of fine percussion instruments to orchestras all;over the United States. The company's class A common stock has paid a dividend;of $ 5.00 per share per year for the last 15 years. Management expects to;continue to pay at that amount for the foresee-able future. Sally Talbot;purchased 100 shares of Kelsey class A common 10 years ago at a time when the;required rate of return for the stock was 16%. She wants to sell her shares;today. The current required rate of return for the stock is 12%. How much;capital gain or loss will Sally have on her shares?;2-Common Stock Value: Variable Growth;Newman Manufacturing is considering a cash purchase of;the stock of Grip Tool. During the year just completed, Grips earned $4.25 par;share and paid cash dividends of $2.55 per share (D0= 2.55$). Grips' earnings;and dividends are expected to grow at 25% per year for the next 3 years, after;which they are expected to grow at 10% per year to infinity. What is the;maximum price per share that Newman should pay for Grip if it has a required;return of 15% on investment with risk characteristics similar to those of Grips?


Paper#51355 | Written in 18-Jul-2015

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