Ch.6 -Stocks_ In-Class Problems

Ch.6 -Stocks_ In-Class Problems - Ch.6 Stocks In-Class...

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Ch.6 Stocks – In-Class Problems 1. Expected Return Model What would you pay for a share of Corporation stock today if the next dividend will be $2 per share, your required rate of return on equity investments is 12%, and the stock is expected to be worth $110 one year from now? A) $95 B) $100 C) $105 D) $110 2. Constant Growth Model (find r) ABC Corporation's common stock dividend yield is 2.1%, it just paid a dividend of $1, and is expected to pay a dividend of $1.07 one year from now. Dividends are expected to grow at a constant rate infinitely. What is the required rate of return on ABC stock? A) 8.9% B) 9.1% C) 9.3% D) 9.6% 3. Constant Growth Model (find g) Given the present market conditions, investors require a rate of return of 20% on DX Corp.’s common stocks, which are currently trading at $15 per share in the market. DX just paid a dividend of $2. What is the implied growth rate in dividends? A)
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This note was uploaded on 06/04/2011 for the course ADMS 3530 taught by Professor Unknown during the Summer '09 term at York University.

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Ch.6 -Stocks_ In-Class Problems - Ch.6 Stocks In-Class...

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