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4. Company X is expected to pay an year-end divide...

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4. Company X is expected to pay an year-end dividend of $8 a share on its common stock. After the dividend payment the stock is expected to sell at $100 per share. The required rate of return on the common stock is 20%. Then, calculate the current price of the stock. 5. A share of common stock has an expected long-run constant dividend growth rate of 8%, and the most recent dividend Do, was $4.00. The required rate of return on the common stock is 20%. Then, using the dividend growth model, calculate the current price of the stock. 6. Company B's dividends are expected to grow at a constant rate of g (for ever). Current price of the stock Po is $40, D1= $1.20 and Ks=9%. Then, calculate the constant growth rate "g." 7. If the dividends on a preferred stock is $9 per year, and the required rate of return on the stock is 12%, then calculate the current price of the preferred stock. 8. For Stock A, the cash dividend expected one year from now is $9 [D1]. The dividends are expected to grow at a constant rate of 4% per year for ever. The required rate of return on the common stock is 16%. Then calculate the current price of the stock using the dividend growth model. 9. The following cash flows are given for the project Z: Co= -$6,000, C1= +$3,000, C2 = +$4,000, C3= +$6,000, C4= +$2,000, C5= $1,000 Calculate the following : (a) NPV at 12% discount rate (b) IRR (C) The playback period of Project (Z) 10. The following cash flows are give for the two mutually exclusive projects X and Y. The project X requires an initial investment of $12,000 (in time '0') and project Y needs an initial investment of $10,000 (in time '0'). Year 1 2 3 4 Project X $4,500, 6,000, 7,500, 9,000 Project Y $9,000, 5,000, 4,500, 3,000 (a) Calculate the NPV for each project using a discount rate of 12%. (b) State your accept/reject decision for each project.

 

Paper#5254 | Written in 18-Jul-2015

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