8
________
1.
You would like to earn a 9.5 percent rate of return on a 9 percent preferred stock. How much are you willing
to pay for 10 shares?
a. $94.74
b. $105.56
c. $947.37
d. $1,055.56
________
2.
The common stock of Andy’s Sporting Goods sells for $25.40 a share. The company recently paid their
annual dividend of $1.30 per share and expects to increase this dividend by 3 percent annually. What is the
rate of return on this stock?
________
3.
The Black & Gold Co. is expected to pay a $2.50 annual dividend next year. The market rate of return on this
security is 12 percent and the market price is $31.40 a share. What is the expected growth rate of Black &
Gold?
________
4.
Battles, Inc. just paid an annual dividend of $1.20 a share. The dividend will increase by 3 percent for the
next three years and then increase by 2 percent annually thereafter. What is the present value of this stock at a
discount rate of 9 percent?
________
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 Spring '08
 Ddavidson
 Finance, Time Value Of Money, Net Present Value, Dividend

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