FI515_Homework4_BrianLin - Brian Lin D01278742 Week 4...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Brian Lin D01278742 Week 4 Homework Chapter 7 Questions Question 7-2 Boehm Incorporated is expected to pay a $1.50 per share dividend at the end of this year (i.e. D 1 = $1.50). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, r s , is 15%. What is the value per share of Boehm’s stock? D 1 = 1.50 P 0 = D 1 /r s -g P 0 = 1.5/15%-7% P 0 = $18.75 Question 7-4 Nick’s Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $5 at the end of each year. The preferred sells for $50 a share. What is the stock’s required rate of return? r^ s = D PS /V PS r^ s = 5/50 r^ s = 10% Question 7-5 A company currently pays a dividend of $2 per share (D 0 = $2). It is estimated that the company’s dividend will grow at a rate of 20% per year for the next 2 years, then at a constant rate of 7% thereafter. The company’s stock has a beta of 1.2, the risk free rate is 7.5%, and the market risk premium is 4%. What is your estimate of the stock’s current
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/13/2011 for the course MAFM FI516 taught by Professor Anthonycriniti during the Spring '10 term at Keller Graduate School of Management.

Page1 / 3

FI515_Homework4_BrianLin - Brian Lin D01278742 Week 4...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online