What will be the price of the stock in year four

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Reference no: EM132074125

1. The stock of Harris Inc. recently paid a dividend of $1.42. The growth rate of dividends has been 7%. Assuming the growth rate continues, what should be the price of the stock if investors demand a 12% rate of return? Show equation and work.

a. $22.50

b. $21.45

c. $26.50

d. $25.00

e. $30.39

2. ABC stock is expected to pay a dividend of $2.30 next year and continue to grow at a rate of 7% thereafter. What should be the price of the stock if investors demand a 14% rate of return? Show equation and work.

a. $28.75

b. $31.25

c. $32.86

d. $35.71

e. $38.33

3. A stock paid a dividend of $2.00 today P(0). If the growth rate of dividends is expected to be 8% and investors demand a 14% rate of return what will be the price of the stock in year 4? Show equation and work.

a. $48.98

b. $40.07

c. $30.42

d. $42.78

e. $33.46

4. A perpetual preferred stock pays a dividend of $2.92 per face value of $100. What is the price of the preferred stock if investors demand a 14% rate of return. Show equation and work.

a. $29.15

b. $35.00

c. $30.00

d. $20.71

e. $31.25

5. Harris company paid a dividend of 1.50 today. It expects dividend payments to increase by 15% every year for the next three years before resuming a normal growth of 6%. What should you pay for this stock if you demand a 16% rate of return? Show equation and work.

a. $21.24

b. $19.92

c. $26.65

d. $24.98

e. $23.25

6. Ray Inc. company is not expected to pay any dividends for three years while it attempts to restructure its business. They anticipate paying $1.20 in year four and thereafter growing at a rate of 6%. What should we pay for the stock if we demand a 15% rate of return? Show equation and work.

a. $8.77

b. $10.96

c. $14.24

d. $17.79

e. $9.50

7. A company has 200 shares. What is the minimum number of shares required for a minority shareholder to elect one board member out of 3 members to be elected? Show equation and work.

a. 51

b. 101

c. 41

d. 126

e. 76

8. Deep River company is expected to pay a dividend of $2.80 next year. Its dividends are expected to grow at a rate of 5%. If the price of the stock is $80, what rate of return are investors demanding? Show equation and work.

a. 9.00%

b. 8.43%

c. 8.50%

d. 8.68%

e. 9.62%

Reference no: EM132074125

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