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

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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

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

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