Reference no: EM132946151

Problem A. What is the most likely value of the PVGO for a stock with current price of $50, expected earnings of $6 per share, and a required return of 20 percent?

Problem B. What should be the stock value one year from today for a stock that currently sells for $35, has a required return of 15 percent, an expected dividend of $2.80, and a constant dividend growth rate of 7 percent?

Problem C. What would be the expected price of a stock when dividends are expected to grow at a 25 percent rate for three years, and then grow at a constant rate of 5 percent, if the stock's required return is 13 percent and next year's dividend will be $4.00?

Problem D. A startup company is preparing to issue its stocks for the first time. It announces that it plans to give its first dividend of $5/share at the end of the 5th year of its operation. It also announces that the dividend will grow at a constant 3% a year indefinitely thereafter. If the investors expect a return of 15% per annum, what should be the expected price of the stock today?