Reference no: EM132924910

Questions -

Q1) Saine Corporation will pay a $3.22 per share dividend next year. The company pledges to increase its dividend by 6 percent per year, indefinitely. If you require a return of 11 percent on your investment, how much will you pay for the company's stock today?

Q2) Meteora, Inc., has an issue of preferred stock outstanding that pays a dividend of $6.35 every year, in perpetuity. This issue currently sells for $92 per share. What is the required return?

Q3) Upton Corporation is expected to pay the following dividends over the next four years: $15, $12, $11, and $3.50. Afterwards, the company pledges to maintain a constant 6 percent growth rate in dividends forever. If the required return on the stock is 10 percent, what is the current share price?

Q4) Full Boat Manufacturing has projected sales of $123.5 million next year. Costs are expected to be $73.6 million and net investment is expected to be $14.75 million. Each of these values is expected to grow at 14 percent the following year, with the growth rate declining by 2 percent per year until the growth rate reaches 6 percent, where it is expected to remain indefinitely. There are 6.4 million shares of stock outstanding and investors require a return of 11 percent return on the company's stock. The corporate tax rate is 22 percent. What is your estimate of the current stock price? Suppose instead that you estimate the terminal value of the company using a PE multiple. The industry PE multiple is 13. What is your new estimate of the company's stock price?