Explain what debt investments are investment grade

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Question 1) Suppose a stock is expected to pay a $1.00 dividend every month and the required return is 5% with monthly compounding. What is the price?

Question 2: Suppose Big Al's Pizza, Inc. just paid a dividend of $0.75. It is expected to increase its dividend by 4% per year. If the market requires a return of 5% on assets of this risk, how much should the stock be selling for?

Question 3: The News Company is expected to pay a dividend of $10 next period and dividends are expected to grow at 5% per year. The required return is 18%. What is the current price?

Question 4: Suppose we are trying to value the company Beta Investments, an investment firm that does not pay dividends. If the appropriate industry PE for this type of company is 15 and you predict earnings to be $5.00 per share for the coming year. What is the forecasted stock price for a year from now?

Question 5: Suppose the stock price of the company Alpha Investments, an investment firm that does not pay dividends, is $210.00. If the appropriate industry PE for this type of company is 5. What is the forecasted earnings for Alpha Investments?

Question 6: Explain what debt investments are investment grade. What rate of return would you expect on investment grade debt versus other non-investment grade debt (and why)?

Question 7: Explain the difference between constant dividend growth and supernatural dividend growth.

Reference no: EM133377461

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