FIN 419 Problem 1 stock & Problem 2 stock

Instructions1. You have two problems - one on each tab of this Excel file.
2. Please show your work in the cells. Use Excel formulas instead of writing the values/answers directly in the cell.
The instructor will then know where you made a mistake and provide you valuable feedback and partial credit (if appropriate).Total Points: 8

Company X is paying an annual dividend of $1.35 and has decided to pay the same amount forever. How much should you pay for the stock, if you want to earn an annual rate of return of 9.5% on this investment?

Dividend $1.35
Rate of Return 0.095



Answer:

You want to purchase common stock of Company X and hold it for 7 years. The company just announced that they will be paying an annual cash dividend of $6.00 per share for the next 9 years.
How much should you pay for the stock, if you will be able to sell the stock for $28 at the end of seven years and you want to earn an annual rate of return of 11% on this investment?

Future Price $28.00
Dividend $6.00
Rate of Return (r) 0.11
Number of years (n) 9



PRICE = $28.00 x 0.434 + $6.00 x 5.146
ANSWER =