Assignment4 Solutions

Assignment4 Solutions - ECON 301 A01/ A02 Assignment 3 Due:...

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

View Full Document Right Arrow Icon
ECON 301 A01/ A02 Assignment 3 Due: Friday October 28 th by 3 p.m. Answer all questions completely and concisely. Show all calculations where appropriate. 1. Compute the price of a share of stock that pays a $1 per year dividend and that you expect to be able to sell in one year for $20 assuming you require a 15% return. 2. If Universal Power (UP) is currently paying an annual dividend of $0.40 per share, its dividend is expected to grow at a rate of 5% per year and the required return on equity is 10%. Calculate the price per share of UP’s stock. = $8.40 3. In September 2011, the price of Dawn West Nebraska (DWN) was $100 per share. At the time DWN was paying an annual dividend of $1.10 per share. If the required return on equity was 8%, what growth rate in DWN’s dividend would investors have been expecting? $100 x (0.08-g) = $1.10 x (1+g) $8 -$100g = $1.10 +$1.10g $101.10g=$6.90 g = $6.90/$101.10 = 0.06824 = 6.8% 4. You are the CEO of EBIT Bank which has the following T-accounts. Assets
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 document was uploaded on 12/04/2011.

Page1 / 2

Assignment4 Solutions - ECON 301 A01/ A02 Assignment 3 Due:...

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