Finance Homework

QUESTION 1

1. A stock's next dividend is expected to be $2.2. The required rate of return on stock is 12%, and the expected constant growth rate is 7.1%. 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.

   QUESTION 3

   1. ABC is expected to pay a dividend of $3.8 per share at the end of the year. The stock sells for $187 per share, and its required rate of return is 13.5%. The dividend is expected to grow at some constant rate, g, forever. What is the growth rate (i.e. solve for g)?

      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.

   QUESTION 5

   1. ABC's last dividend was $3.1. The dividend growth rate is expected to be constant at 20% for 3 years, after which dividends are expected to grow at a rate of 5% forever. If the firm's required return (r_s) 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 6

   1. 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 7

   1. ABC Enterprises' stock is expected to pay a dividend of $2 per share. The dividend is projected to increase at a constant rate of 3.7% per year. The required rate of return on the stock is 14.5%. 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 8

   1. ABC’s last dividend paid was $2.6, its required return is 19.1%, its growth rate is 7.6%, 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 9

   1. If D₁ = $5.24, g (which is constant) = 2%, and P₀ = $51.83, what is the stock’s expected dividend yield 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 10

   1. If last dividend = $7.3, g = 2.6%, and P₀ = $73.7, 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 11

   1. ABC Enterprises' stock is currently selling for $40.9 per share. The dividend is projected to increase at a constant rate of 3.9% 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 12

   1. A stock is expected to pay a dividend of $1.8 at the end of the year. The required rate of return is r_s = 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. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

   1 points

   QUESTION 13

   1. A stock just paid a dividend of D₀ = $2.3. The required rate of return is r_s = 13.3%, and the constant growth rate is g = 5.8%. 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 14

   1. If D₁ = $2, g (which is constant) = 8.2%, and P₀ = $64.7, 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 15

   1. ABC's stock has a required rate of return of 12.8%, and it sells for $60 per share. The dividend is expected to grow at a constant rate of 8.4% per year. What is the expected year-end dividend, D₁?

      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 16

   1. ABC Company's last dividend was $3.3. The dividend growth rate is expected to be constant at 27% for 2 years, after which dividends are expected to grow at a rate of 5% forever. The firm's required return (r_s) is 14%. 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 17

   1. ABC Inc., is expected to pay an annual dividend of $2.5 per share next year. The required return is 14.4 percent and the growth rate is 6.6 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 18

   1. A stock just paid a dividend of $1.7. The required rate of return is 9.6%, and the constant growth rate is 4.8%. 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 19

   1. If the market value of debt is $158,928, market value of preferred stock is $70,171, and market value of common equity is 463,683, what is the weight of preferred stock?

      Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

   1 points

   QUESTION 20

   1. The before-tax cost of debt is 5.2 percent. What is the after-tax cost of debt if the tax rate is 51 percent?

      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.