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Unformatted text preview: Problem # 6 What is the expected dividend to be paid in three years if yesterday's dividend was $6.00, dividends are expected to grow at a constant 6% annual rate, and the firm has a 10% expected return? Problem # 7 Show the breakdown of stock price between a firm's assets that are already in place and its present value of growth opportunities, assuming: next year's expected earnings equal $5.00, 13% required rate of return, 17% return on equity, 45% plowback ratio. Problem # 8 Motor Homes Inc. (MHI) is presently enjoying abnormally high growth because of a surge in the demand for motor homes. The company expects earnings and dividends to grow at a rate of 20% for the next 4 years, after which there will be no growth (g = 0) in earnings and dividends. The company’s last dividend, D , was $1.50. MHI’s beta is 1.5, the market risk premium is 6%, and the risk-free rate is 4%. What is the current price of the common stock?...
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This note was uploaded on 11/09/2009 for the course SBA fin3301 taught by Professor S.koubida during the Spring '09 term at Al Akhawayn University.
- Spring '09