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Unformatted text preview: Name: ___________________________________ NetID: _______________________ Prof. Q. Ma, HADM 2222 Fall 2009 1/2 HADM 2222 Fall 2009, Prof. Q. Ma Homework assignment #3 [Due 10 a.m. Wednesday, October 7, 2009, Statler 435 drop box] 1. Spears, Inc., has an odd dividend policy. The company has just paid a dividend of $7.00 per share and has announced that it will increase the dividend by $4.00 per share for each of the next four years, and then never pay another dividend. If you require an 11 percent return on the company’s stock, how much will you pay for a share today? 2. North Side Corporation is expected to pay the following dividends over the next four years: $8.00, $7.00, $5.00, and $2.00. Afterward, the company pledges to maintain a constant 5 percent growth rate in dividends forever. If the required return on the stock is 11 percent, what is the current share price? 3. Rizzi Co. is growing quickly. Dividends are expected to grow at a 25 percent rate for the next three years, with the growth rate falling off to a constant 7 percent thereafter. If the required return is 13 percent and with the growth rate falling off to a constant 7 percent thereafter....
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This note was uploaded on 10/09/2009 for the course H ADM 236 at Cornell.