FINC560 Module 4quiz_anws.doc - FINC 560 Quiz on Module 4(6 points in total Please show the formula and all steps for full credit Time Limit 75 minutes

FINC560 Module 4quiz_anws.doc - FINC 560 Quiz on Module 4(6...

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FINC 560: Quiz on Module 4 (6 points in total) Please show the formula and all steps for full credit. Time Limit: 75 minutes 1. (0.4 point)Tate Realty is expected to pay a dividend (D1) of $3.00 next year with the growth (g)in dividends expected to remain constant at 5%. The required rate of return r is 10%. Calculate Po. a.Show formula (0.1 point)b.Show all work (0.2 point)c.Present answer (0.1 point) PV = D 1 /(r-g) = 3/(.10-0.05) = 60 2. (1.8 point)Lora Corp. anticipates a non-constant growth pattern for dividends. Dividends are expected to be $1.30 next year followed by a 15% growth rate until the end of year five. At this time dividends will grow at a 5% rate for the foreseeable future. Use a discount rate of 12% (Ke) throughout your analysis. Round all values that you compute to two places to the right of the decimal point. Calculate P0.
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  • Fall '19
  • Cecilia Ricci, Ph.D.

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