CHAPTER9HANDOUT - 3 Texas Instruments a firm with a Beta...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 9: Equity Pricing 1) Microsoft Inc. has just paid a dividend of $4.00 per share. You believe Microsoft’s dividend will be paid every year and will remain constant over time. If Microsoft’s required rate of return is 15% per year, what is the price of Microsoft’s stock? 2) Cisco Inc. is planning on paying a dividend of $3.50 one year from today and will pay a dividend on a yearly basis. You believe the growth rate of that dividend will be 6% per year and you know Cisco’s required rate of return is 14% per year. What is Cisco’s stock price?
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 3) Texas Instruments, a firm with a Beta equal to 1.5, is poised for huge growth to the number of calculators projected to be sold to new Finance students in the upcoming years. You believe the growth rate of Texas Instrument’s dividend will be 25% for the next three years and will then grow at a more modest 6% after that. You know the market has had an average return of 14% and the risk free rate is equal to 2%. What is the price of Texas Instrument’s stock if they just paid a dividend of $5.00 per share?...
View Full Document

This note was uploaded on 12/04/2011 for the course FIN 3300 taught by Professor Toddstotnitch during the Fall '11 term at Georgia State.

Ask a homework question - tutors are online