vv-19 - Ch 7 in-class problems 1 Angelinas made two...

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1. Angelina’s made two announcements concerning their common stock today. First, the company announced that their next annual dividend has been set at $2.16 a share. Secondly, the company announced that all future dividends will increase by 4 percent annually. What is the maximum amount you should pay to purchase a share of Angelina’s stock if your goal is to earn a 10 percent rate of return? a. $21.60 b. $22.46 c. $27.44 d. $36.00 e. none of the above ; P 0 = $36.00 2. Martin’s Yachts has paid annual dividends of $1.40, $1.75, and $2.00 a share over the past three years, respectively. The company now predicts that it will maintain a constant dividend since its business has leveled off and sales are expected to remain relatively constant. Given the lack of future growth, you will only buy this stock if you can earn at least a 15 percent rate of return. What is the maximum amount you are willing to pay to buy one share of this stock today? a.
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This note was uploaded on 04/07/2011 for the course BUS M 301 taught by Professor Jimbrau during the Winter '11 term at BYU.

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vv-19 - Ch 7 in-class problems 1 Angelinas made two...

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