Reference no: EM132232950
CONSTANT GROWTH VALUATION
Tresnan Brothers is expected to pay a $1 per share dividend at the end of the year (i.e., D1 = $1). The dividend is expected to grow at a constant rate of 9% a year. The required rate of return on the stock, rs, is 20%. What is the stock's current value per share? Round your answer to two decimal places.
CONSTANT GROWTH VALUATION
Holtzman Clothiers's stock currently sells for $16 a share. It just paid a dividend of $1.75 a share (i.e., D0 = $1.75). The dividend is expected to grow at a constant rate of 5% a year.
a. What stock price is expected 1 year from now? Round your answer to two decimal places.
b. What is the required rate of return? Round your answer to two decimal places. Do not round your intermediate calculations.
PREFERRED STOCK VALUATION
Farley Inc. has perpetual preferred stock outstanding that sells for $36.00 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.
DPS CALCULATION
Weston Corporation just paid a dividend of $1 a share (i.e., D0 = $1). The dividend is expected to grow 12% a year for the next 3 years and then at 5% a year thereafter. What is the expected dividend per share for each of the next 5 years? Round your answers to two decimal places.
NONCONSTANT GROWTH VALUATION
Holt Enterprises recently paid a dividend, D0, of $3.00. It expects to have nonconstant growth of 19% for 2 years followed by a constant rate of 4% thereafter. The firm's required return is 17%.
a. How far away is the horizon date?
I. 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.
II. The terminal, or horizon, date is the date when the growth rate becomes nonconstant. This occurs at time zero.
III. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the beginning of Year 2.
IV. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2.
V. The terminal, or horizon, date is infinity since common stocks do not have a maturity date.
b. What is the firm's horizon, or continuing, value? Round your answer to two decimal places. Do not round your intermediate calculations.
c. What is the firm's intrinsic value today, P^0? Round your answer to two decimal places. Do not round your intermediate calculations.
NONCONSTANT GROWTH
Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $1.25 coming 3 years from today. The dividend should grow rapidly-at a rate of 20% per year-during Years 4 and 5; but after Year 5, growth should be a constant 7% per year. If the required return on Computech is 15%, what is the value of the stock today? Round your answer to the nearest cent. Do not round your intermediate calculations.
Attachment:- Constant Growth Stocks.rar