Reference no: EM132506237

Determine the value of the following stocks:

Question a. The Goofy Gadget Company currently pays a dividend of Php 2.50 per common share. If dividends are expected to grow at a rate of 5% per year and the required rate of return on Goofy common stock is 8%, what is the value of a share of Goofy stock? If the stock is selling at Php 90.00 should you buy it? Why?

Question b. The Ohm Company paid a Php2.50 dividend per share at the end of the year. The dividend is expected to grow by 10 percent each year for the next 3 years, and the stock's market price per share is expected to be Php 50 at the end of the third year. Investors require a rate of return of 14 percent. At what price per share should the Ohm stock sell?

Question c. Investors require a 10 percent per year return on the stock of the Take-One Corporation, which anticipates a non-constant growth pattern for dividends. The company paid a Php 2 per share dividend. The dividend is expected to grow by 15 percent per year until the end of year 4 (i.e., for the next 3 years) and 7 percent thereafter.