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Unformatted text preview: Chapter 9 Homework Finance 302 9-2 CONSTANT GROWTH VALUATION: Thomas Brothers is expected to pay a $0.50 share dividend at the end of the year (that is, D 1 = $0.50). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on a stock, r S , is 15%. What is the stocks current value per share? 9-3 CONSTANT GROWTH VALUATION: Harrison Clothiers stock currently sells for $20.00 a share. It just paid a dividend of $1.00 a share (that is, D = $.1.00). The dividend is expected to grow at a constant rate of 6% a year. What stock price is expected 1 year from now? What is the required rate of return? 9-6 PREFERRED STOCK VALUATION: Fee Founders has perpetual preferred stock outstanding that sells for $60 a share and pays a dividend of $5 at the end of each year. What is the required rate of return? 9-7 PREFERRED STOCK RATE OF RETURN: What will be the nominal rate of return on a perpetual preferred stock with a $100 par value, a stated dividend of 8% of par, and a current market price of (a) $60, (b) $80, (c) $100, and (d) $140? 9-8 PREFERRED STOCK VALUATION:...
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