Chapter 7b

# Chapter 7b - Chapter 7b 1 Calculate the value of a...

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Chapter 7b 1. Calculate the value of a preferred stock that pays a \$50 dividend. Your required rate of return is 9%. 2. What is the value of a stock that pays the following end-of-year-dividends (\$ 22.75, \$37.89, and \$43.88 ) for a 3-year period then stops paying dividends? Your required rate of return is 10.5%. 3. Calculate the current price of common stock that pays a \$5.20 dividend today and has a 3.75% growth rate. Your required rate of return is 13%. 4. Calculate the time zero dividend. Current stock price is \$51.50. Growth rate is 3% and required rate of return is 11%. 5. What is the intrinsic value of a stock that generates cash flows of \$25, \$35, \$45, \$55, and \$65 at years 1 through 5? Discount Rate is 14%. 6. A stock is being sold for \$270 per share. It is projected that this stock will pay dividends of 13, 20, and 27 dollars in years 1 through 3 and increase at a growth rate of 3.5% thereafter. Should you or should you not buy this stock? Your discount rate is 12%. 7. Awesome Inc. has common stock that is selling for \$230.77. It expects its next year’s dividend to be \$15.

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