Stocks and their valuation

DPS calculation

Weston Corporation just paid a dividend of $3.75 a share (i.e., D₀ = $3.75). The dividend is expected to grow 9% a year for the next 3 years and then at 4% a year thereafter. What is the expected dividend per share for each of the next 5 years? Round your answers to two decimal places.

D₁ = $
D₂ = $
D₃ = $
D₄ = $
D₅ = $

Constant growth valuation

Tresnan Brothers is expected to pay a $2 per share dividend at the end of the year (i.e., D₁ = $2). The dividend is expected to grow at a constant rate of 6% a year. The required rate of return on the stock, r_s, is 14%. What is the stock's current value per share? Round your answer to two decimal places.

$

Constant growth valuation

Holtzman Clothiers' stock currently sells for $35 a share. It just paid a dividend of $2.25 a share (i.e., D₀ = $2.25). The dividend is expected to grow at a constant rate of 9% a year.

1. What stock price is expected 1 year from now? Round your answer to two decimal places.
   $
2. What is the required rate of return? Round your answers to two decimal places. Do not round your intermediate calculations.
   %

Nonconstant growth valuation

Holt Enterprises recently paid a dividend, D₀, of $3.75. It expects to have nonconstant growth of 23% for 2 years followed by a constant rate of 6% thereafter. The firm's required return is 9%.

1. How far away is the horizon date?
1. The terminal, or horizon, date is Year 0 since the value of a common stock is the present value of all future expected dividends at time zero.
2. The terminal, or horizon, date is the date when the growth rate becomes nonconstant. This occurs at time zero.
3. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the beginning of Year 2.
4. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2.
5. The terminal, or horizon, date is infinity since common stocks do not have a maturity date.

2. What is the firm's horizon, or continuing, value? Round your answer to two decimal places. Do not round your intermediate calculations.
   
   $
3. What is the firm's intrinsic value today, P₀? Round your answer to two decimal places. Do not round your intermediate calculations.
   
   $

Corporate valuation

Scampini Technologies is expected to generate $50 million in free cash flow next year, and FCF is expected to grow at a constant rate of 7% per year indefinitely. Scampini has no debt or preferred stock, and its WACC is 14%. If Scampini has 35 million shares of stock outstanding, what is the stock's value per share? Round your answer to two decimal places.

Each share of common stock is worth $ , according to the corporate valuation model.

Preferred stock valuation

Farley Inc. has perpetual preferred stock outstanding that sells for $44.00 a share and pays a dividend of $5.00 at the end of each year. What is the required rate of return? Round your answer to two decimal places.

%

Preferred stock valuation

Earley Corporation issued perpetual preferred stock with a 10% annual dividend. The stock currently yields 10%, and its par value is $100.

1. What is the stock's value? Round your answer to two decimal places.
   $
2. Suppose interest rates rise and pull the preferred stock's yield up to 12%. What is its new market value? Round your answer to two decimal places.
   $