Reference no: EM133068939

1. Consider a stock that will have dividend growth rates in the next three periods of 20%, 15%, and 3.5%, respectively. The third growth rate remains forever. The company just paid a dividend, D0, of $1.12. The interest rate is 12%. How much are the dividends in periods 1, 2, and 3? Enter your answers rounded to 2 DECIMAL PLACES.

D1=

D2=

D3=

2.Shield Corp. expects an earnings per share of $2.06 and reinvests 40% of its earnings. Management projects a rate of return of 12% on new projects and investors expect a 10% rate of return on the stock.

a. What is the sustainable growth rate? Enter your answer as a percentage. Do not include the percentage sign in your answer.

Enter your response below rounded to 2 DECIMAL PLACES.

b. Given a sustainable growth rate of 4.8%, what is the price of the stock with growth?

Enter your response below rounded to 2 DECIMAL PLACES.

c. What would be the price of the stock with no growth?

Enter your response below rounded to 2 DECIMAL PLACES.

3.Grape Co. has a stock that has a current price of $46.13. A year from now, the stock is expected to pay a dividend of $1.9 and the price will be $43.31. What is the expected rate of return for this stock? Enter your answer as a percentage. Do not include the percentage sign in your answer.

Enter your response below rounded to 2 DECIMAL PLACES.

4. A firm is expected to have earnings next year of $5.35 per share and the firm is expected to pay a dividend of $2.59. Investors' required rate of return is 8%. If the sustainable growth rate is 8%, what must be the rate of return earned by the firm on its new investments? Enter your answer as a percentage. Do not include the percentage sign in your answer.

Enter your response below rounded to 2 DECIMAL PLACES.