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Unformatted text preview: FINA 4920 Computers in Finance Practice Problems Stock Valuation Practice - Basic 1. Ana is considering buying a share of common stock. She knows that the stock just paid an annual dividend of $2.50 yesterday, and she expects this dividend to remain constant indefinitely. If she estimates that the discount rate of equity is 15%, what will she pay for the stock? 2. Jack wants to become a common stockholder of Victory Brewing Co. He knows that the company is a mature company, and he estimates that the company grows their dividend each year by 4.5%. Victory just paid a dividend of $7.25, and dividends are paid annually. What price will Jack expect to pay for the stock, if he evaluates the stock at a discount rate of 15%? 3. Bing just paid a dividend of $1.85 (dividends are annual). You are evaluating the stock’s prospects and price, and you know that since Bing is still growing, the dividend growth rate will...
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- Spring '11