Reference no: EM133120245
1. (Assumption #1) NJK Industries pays semiannual dividends on its outstanding common stock. It just paid a dividend of D0 = $1.50 per share. NJK expects the dividend to remain constant into the foreseeable future (i.e., for a really long time).
A. Draw a timeline showing the next four dividend amounts for this company (i.e., D1, D2, D3, and D4).
B. If your required rate of return on NJK stock is 2.5% per year, compounded semiannually, what is your estimate of the stock's value?
C. Assume a market price of $105.00 per share for NJK stock. What is the (expected, realized) return on the stock at this price?
2. (Assumption #1) MSB Inc. pays quarterly dividends on its outstanding common stock. It just paid a dividend of D0 = $.75 per share and intends to hold that dividend constant into the foreseeable future (i.e., for a really long time).
A. Draw a timeline showing the next four dividend amounts for this company (i.e., D1, D2, D3, and D4).
B. If your required rate of return on MSB stock is 4% per year, compounded quarterly, what is your estimate of the stock's value?
C. Assume a market price of $80.00 per share for MSB stock. What is the (expected, realized) return on the stock at this price?
3. (Assumption #2) You are considering common stock in a company that pays semiannual dividends. Its upcoming dividend will be of D1 = $3.00 per share. Dividends are expected to grow at a rate of 2.5% per year into the foreseeable future (i.e., for a really long time).
A. Draw a timeline showing the next four dividend amounts for this company (i.e., D1, D2, D3, and D4)
B. If your required rate of return on this stock is 4% per year, compounded semiannually, what is your estimate of the stock's value?
C. Assume a market price of $380 per share for this stock. What is the (expected, realized) return on the stock at this price?
4. (Assumption #2) You are considering common stock in a company that pays semiannual dividends. Its upcoming dividend will be of D1 = $1.25 per share. Dividends are expected to grow at a rate of 3% per year into the foreseeable future (i.e., for a really long time).
A. Draw a timeline showing the next four dividend amounts for this company (i.e., D1, D2, D3, and D4)
B. If your required rate of return on this stock is 5% per year, compounded semiannually, what is your estimate of the stock's value?
C. Assume a market price of $180 per share for this stock. What is the (expected, realized) return on the stock at this price?
5. (Assumption #2) REC Industries pays semiannual dividends on its outstanding common stock. It just paid a dividend of D0 = $4.25 per share. REC expects that dividend to grow at a rate of 2.4% per year into the foreseeable future (i.e., for a really long time).
A. Draw a timeline showing the next four dividend amounts for this company (i.e., D1, D2, D3, and D4).
B. If your required rate of return on REC stock is 5% per year, compounded semiannually, what is your estimate of the stock's value?
C. Assume a market price of $342.50 per share for REC stock. What is the (expected, realized) return on the stock at this price?
6. (Assumption #2) You are considering common stock in a company that pays semiannual dividends. It just paid a dividend of D0 = $2.50 per share and expects dividends to grow at a rate of 6% per year into the foreseeable future (i.e., for a really long time).
A. Draw a timeline showing the next four dividend amounts for this company (i.e., D1, D2, D3, and D4).
B. If your required rate of return on this stock is 7% per year, compounded semiannually, what is your estimate of the stock's value?
C. Assume a market price of $525 per share for this stock. What is the (expected, realized) return on the stock at this price?