Stock worth today at a 12 percent discount rate

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1. CEPS Group announced today that it will begin paying annual dividends next year. The first dividend will be OMR 0.52 a share. The following dividends will be OMR 0.67, OMR 0.72, OMR 0.81, and OMR 0.90 a share annually for the following 4 years, respectively. After that, dividends are projected to increase by 5 percent per year. How much are you willing to pay to buy one share of this stock today if your desired rate of return is 9.5 percent?

2. CEPS Group just paid an annual dividend of OMR 5.25 a share. The firm plans to increase the annual dividends by 2 percent over the next 3 years. After that time, the dividends will be held constant at OMR 6.5 per share. What is this stock worth today at a 12 percent discount rate?

3. You recently purchased a stock that is expected to earn 11 percent in a booming economy, 5 percent in a normal economy, and lose 17 percent in a recessionary economy. There is a 25 percent probability of a boom and a 60 percent chance of a normal economy. What is your expected rate of return on this stock?

4. You recently purchased a stock that is expected to earn 11 percent in a booming economy, 5 percent in a normal economy, and lose 17 percent in a recessionary economy. There is a 25 percent probability of a boom and a 60 percent chance of a normal economy. What is standard deviation on this stock?

Reference no: EM132535317

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