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##### ABC?s last dividend paid was $1, its required return is 12.6%, its growth rate is 7.8%, and its growth rate is expected to be constant in the future. What is Sorenson's expected stock price in 7 years,

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solution

**Question**

Question 1;ABC?s last dividend paid was $1, its required return is 12.6%, its growth rate is 7.8%, and its growth rate is expected to be constant in the future. What is Sorenson's expected stock price in 7 years, i.e., what is P7?;Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.;1 points;Question 2;A stock's next dividend is expected to be $0.6. The required rate of return on stock is 13.2%, and the expected constant growth rate is 6%. What is the stock's current price?;Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.;1 points;Question 3;ABC Enterprises' stock is currently selling for $94.8 per share. The dividend is projected to increase at a constant rate of 6% per year. The required rate of return on the stock is 12%. What is the stock's expected price 5 years from today (i.e. solve for P5)?;Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.;1 points;Question 4;The common stock of Wetmore Industries is valued at $52.6 a share. The company increases their dividend by 4.9 percent annually and expects their next dividend to be $1.5. What is the required rate of return on this stock?;Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.;1 points;Question 5;If last dividend = $6, g = 6.4%, and P0 = $69.3, what is the stock?s expected total return for the coming year?;Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.;1 points;Question 6;ABC Enterprises' stock is expected to pay a dividend of $1.6 per share. The dividend is projected to increase at a constant rate of 6.7% per year. The required rate of return on the stock is 12.5%. What is the stock's expected price 3 years from today (i.e. solve for P3)?;Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.;1 points;Question 7;ABC just paid a dividend of D0 = $1.4. Analysts expect the company's dividend to grow by 30% this year, by 27% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on this stock is 14%. What is the best estimate of the stock?s current market value?;Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.;1 points;Question 8;If D1 = $3.4, g (which is constant) = 2.1%, and P0 = $67, what is the stock?s expected total return for the coming year?;Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.;1 points;Question 9;ABC Company's last dividend was $4. The dividend growth rate is expected to be constant at 17% for 2 years, after which dividends are expected to grow at a rate of 7% forever. The firm's required return (rs) is 16%. What is its current stock price (i.e. solve for Po)?;Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.;1 points;Question 10;A stock just paid a dividend of $0.8. The required rate of return is 10.6%, and the constant growth rate is 6.2%. What is the current stock price?;Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.;1 points;Question 11;ABC Inc., is expected to pay an annual dividend of $1.4 per share next year. The required return is 12.8 percent and the growth rate is 3.9 percent. What is the expected value of this stock five years from now?;Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.;1 points;Question 12;A stock is expected to pay a dividend of $1.8 at the end of the year. The required rate of return is rs = 11.7%, and the expected constant growth rate is g = 6.9%. What is the stock's current price?;Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box.

Paper#79268 | Written in 18-Jul-2015

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