Compute the current value of the stock

Reference no: EM1360315

1. Sam's Company expects to pay a dividend of $6 per share at the end of year one, $9 per share at the end of year two, and then be sold
for $136 per share at the end of year two. If the required rate on the stock is 20%, what is the current value of the stock?

2. FastGrow is a no growth firm and has 2 million shares outstanding. It is expected to earn a constant $20 million per year. If all earnings are paid out as dividends and the cost of capital is 10%, calculate the current price per share for the stock.

3. Given a stock price of $39.77 and an expected return to shareholders of 12.4%, what is the likely growth rate if the annual dividend next year is expected to be $3.50?

4. A firm decides to pay 40% of its $5.00 earnings per share as a dividend. If the remaining is invested at 18% ROE and the firm's expected return is 12%, what is the NPVGO?

Reference no: EM1360315

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