Reference no: EM131015449
Please show work.
1. (common stock valuation, constant growth) YouAc€?cve discovered a company that is expected to pay $2.25 dividend at the end of this year. The dividend is expected to grow forever at a constant rate of 4% a year. The required rate of return for this stock is 8%. Given these conditions, what is the estimated market value per share of this stock?
2. (common stock valuation, non-constant growth) YouAc€?cve discovered a company that is expected to pay $2.25 dividend at the end of this year. You estimate the companyAc€?cs dividends will grow 10% next year and then at a constant rate of 4% thereafter. The required rate of return for this stock is 8%. Given these conditions, what is the estimated market value per share of this stock?
3. (The PE model) Imagine you are estimating the market value of Wild West Oil CompanyAc€?cs stock, which is not publicly traded. So you decide to use the PE model for your valuation. You observe the following PE Ratio comparisons for your project:
Company PE Ratio (from the Internet)
a. Exxon-Mobil 10
b. Chevron 11
c. ConocoPhillips 14
a. What is the implied Ac€A?appropriateAc€?? PE for Wild West Oil Company?
b. Assuming Wild West Oil CompanyAc€?cs EPS is = $3.10, what is your estimate for the market value of the companyAc€?cs stock?
4. (Preferred stock valuation) You have discovered a company which has issued preferred stock with a stated annual dividend of 6% of its par value of $100. The average yield on preferred stock of this type among other companies is 7%. Given these conditions, what is your estimate of the market value of this companyAc€?cs preferred stock?
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