Reference no: EM133305509

1. XYZ Corporation preferred stock promises to pay a dividend of $3.25 per share at the end of each year forever. What is its value to an investor who requires a rate of return of 12%?

2. You are considering buying a share of DCU's common stock. You will hold it for 2 years and then sell it. You expect to get a dividend of $1.50 one year from today and a dividend of $1.75 two years from today. You expect to be able to sell the stock for $20 2 years from today. If you want a 10% rate of return, how much are you willing to pay today?

3. How much are you willing to pay today for a share of DCU Corp if its current dividend is $1.50 and dividends are expected to grow at an annual rate of 20% percent for the next 5 years? You want a return of 15%, and you expect to sell the share for $72 in 5 years.

4. What is the value of a share of stock to an investor who requires a 12% rate of return if the current dividend of $1.20 is expected to grow at 7% forever?

5. The current price of a share of DCU stock is $32.00, and the current dividend is $.60. What is the investor's required rate of return if the dividend is expected to grow forever at 8% per year?

6. The common stock of DCU is currently selling for $37.50 and pays a current annual dividend of $1.10. What is the implied constant growth rate of dividends if an investor's required rate of return is 14%?

7. You are valuing a share of DUC common stock. It is not currently paying dividends, but you think it will pay a dividend of $.50 4 years from today, $.50 5 years from today, and $.70 6 years from today. After Year 6, dividends will grow at 2% per year forever. If you want a 15% return, how much will you pay today for a share?