Reference no: EM132558722

Question 1 - The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.60 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year inde?nitely. If investors require a 12 percent return on the Jackson-Timberlake Wardrobe Co. stock, what is the current price? What will the price be in three years? In 15 years? 2. The next dividend payment by Top Knot, Inc., will be $2.50 per share. The dividends are anticipated to maintain a 5 percent growth rate forever. If the stock currently sells for $48.00 per share, what is the required return? 3. For the company in the previous problem, what is the dividend yield? What is the expected capital gains yield? 4. Stairway Corporation will pay a $3.60 per share dividend next year. The company pledges to increase its dividend by 4.5 percent per year inde?nitely. If you require an 11 percent return on your investment, how much will you pay for the company's stock today? 5. Listen Close Co. is expected to maintain a constant 6.5 percent growth rate in its dividends inde?nitely. If the company has a dividend yield of 3.6 percent, what is the required return on the company's stock? 6. Suppose you know that a company's stock currently sells for $60 per share and the required return on the stock is 12 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?

Question 2 - No More Corp. pays a constant $11 dividend on its stock. The company will maintain this dividend for the next eight years and will then cease paying dividends forever. If the required return on this stock is 10 percent, what is the current share price? 8. Ayden, Inc., has an issue of preferred stock outstanding that pays a $6.50 dividend every year in perpetuity. If this issue currently sells for $113 per share, what is the required return? 9. Great Pumpkin Farms just paid a dividend of $3.50 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year inde?nitely. Investors require a 16 percent return on the stock for the ?rst three years, a 14 percent return for the next three years, and an 11 percent return thereafter. What is the current share price? 10. Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the ?rm needs to plow back its earnings to fuel growth. The company will pay a $10 per share dividend in 10 years and will increase the dividend by 6 percent per year thereafter. If the required return on this stock is 13 percent, what is the current share price? 11. Spears, Inc., has an odd dividend policy. The company has just paid a dividend of $7 per share and has announced that it will increase the dividend by $4 per share for each of the next four years, and then never pay another dividend. If you require an 11 percent return on the company's stock, how much will you pay for a share today? 12. North Side Corporation is expected to pay the following dividends over the next four years: $8, $7, $5, and $2. Afterward, the company pledges to maintain a constant 5 percent growth rate in dividends forever. If the required return on the stock is 11 percent, what is the current share price? 13. Rizzi Co. is growing quickly. Dividends are expected to grow at a 25 percent rate for the next three years, with the growth rate falling off to a constant 7 percent thereafter. If the required return is 13 percent and the company just paid a $3.10 dividend, what is the current share price? 14. Rebel, Inc., is proposing a rights offering. Presently there are 400,000 shares outstanding at $75 each. There will be 70,000 new shares offered at $70 each.

a. What is the new market value of the company?

b. How many rights are associated with one of the new shares?