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MUST SHOW WORK. 1. Herbert has opened a retir...

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MUST SHOW WORK. 1. Herbert has opened a retirement fund account which pays 7 percent interest and requires $5,000 annual deposits. Herbert will retire in 15 years and expects 10 years of retirement life. What is the maximum annual retirement benefit Herbert can get during his retirement years? 2. China America Manufacturing has a beta of 1.50, the risk-free rate of interest is currently 12 percent, and the required return on the market portfolio is 18 percent. The company plans to pay a dividend of $2.45 per share in the coming year and anticipates that its future dividends will increase at an annual rate consistent with that experienced over the 2001-2003 period. Year Dividend 2003 2.32 2004 2.21 2005 2.10 Estimate the value of China America Manufacturing?s stock. 3. Julie?s X-Ray Company paid $2.00 per share in common stock dividends last year. The company?s policy is to allow its dividend to grow at 5 percent for 4 years and then the rate of growth changes to 3 percent per year from year 5 and on. What is the value of the stock if the required rate of return is 8 percent: 4. Compute the value of a share of common stock of Lexi?s Cookie Company whose most recent dividend was $2.50 and is expected to grow at 3 percent per year for the next 5 years, after which the dividend growth rate will increase to 6 percent per year indefinitely. Assume 10 percent required rate of return.

 

Paper#6903 | Written in 18-Jul-2015

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