Question

# Please solve and show the steps as to how you obtained each answer.

- T Corporations has

just paid a dividend of $4.45 per share. The dividends are expected to remain constant. Investors have an expected rate of return of 11.1% on the stock.**What should be the price per share?**

2.L stock has just apid a dividend of 3.20 per share. The dividends are expected to grow at a rate of 8.5% for the next five year, and then at a constant rate of 3.1% after that. The Required Return on Equity is 14.5%. **What should the value of the stock be?**

3.Looking at the analysis of the finanacial statements of Y corporation you project that the dividends for the next five years will be:

D1 2.78

D2 3.45

D3 4.78

D4 2.10

D5 5.41

After year 5, you expect dividends to grow at the same pace of the rest of the ecomony, at 2.3%.**If Y corporation has a Required return on 12.5%, what is the fair value of the stock?**

4.If you purchased a share of stock for $30.00 last year, received a $2.50 dividend, and then sold it at the end of the year for $33.00, **what rate of return did you earn on the investment?**

** **5**. **If company J has earns per share of $4.56, and pays out a dividend of $2.12, **what is its Dividend Payout Ratio? What is its Plowback Ratio?**

6.If a company does each of the following, what would you expect to happen to its stock price (up, down, or stay the same )? Explain why for each-

1) Increases its dividend

2) Buys back its shares in the market

3) Increases its Plowback ratio to 100%

7.If a firm has a ROE of 12.8%, and a plowback ratio of .45, **what is its sustainable growth rate (g) ?**

8.If a company has a growth rate of 5.7%, is currently trading at $23.45 per share, and has an expected dividend of 3.25. **what is the stocks expected return?**

** 9.What is the relationship between the following-?**

The required rate of return on a stock

The yield to maturity of a bond

The discount rate in a present value problem

**10.Explain what is meant by the following posted quote by a stock dealer firm:**

"Corning shares are trading at 32.56 Bid, 20 size and 32.87 Ask, 16 size"

** What is the value of the spread on this trade?**

**11.What is the dividend yield of a stock **with a dividend of $2.10 per share and a price of $26.87 per share?

12.CTA Corporation has a ROE of 20%. It has a dividened payout ratio of 50%.

Last year, its earnings per share was $3.00.

The required return on equity is 12.0%

**a. What is the company's growth rate (g)?**

**b. What is the company's fair value per share? **

**13.**TZ Corporation needs $100,000,000 to construct its new factory. **It can finance the cost in 2 ways:**

1) Issue 100,000 bonds, 10 -year maturity and a coupon rate of 5%.

2) Sell 2,000,000 new shares of common stock, at a price of $50.00 per share. TZ currently has a dividend yield of 5%.

**Give 1 advantage, and 1 disadvantage, to each method of raising the money.**

14.W Corporation has earnings of $2.98 per share and has just paid a dividend per share of $.67. **What percent of it's earning does it reinvest in the business?**

15.E Corporation has a dividend yield of 17%. The most recent dividend was $6.60 per share. **What is the current price of E Corporation**

16.T Manufacturing has just issued a ** perpetual preferred stock**.

**If the preferred stock has a dividend of $5.50 per share, and is currently selling for $42.00 per share, what rate of return do investors expect to earn on this investment?**

17.H Corporation is expected to pay a dividend of 3.50 per share next year. After that time, the dividends are expected to grow at the rate of 4.5% per year in perpetuity. **If investors in this stock require a 10% rate of return, what price should the stock sell at?**

18.Y Co. generates a Return on Equity (ROE) of 20%. It pays out 30% of its earnings as dividends. This year, its earnings will be $4.00 per share. **Investors expect a 16% rate of return on the stock. What is Price of the stock?**

19.M Co. will pay a dividend of $2.00 per share. The company has a 50% dividend payout ratio. **If the company's stock is selling for $32.00 per share, what is its P/E ratio?**

20. J corporation currently pays a dividend of $1.22 per share, which is expected to grow at a constant rate of 5%. **If the current price of J corporation is $32.03 per share, what is the required rate of return on the stock?**

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