**Problem 8-7**

Tyler Inc.’s most recent annual dividend was $3.50 a share. The firm has been growing at a consistent 4% rate for several years, but analysts generally believe better times are ahead and future growth will be in the neighborhood of 5%. The stock is currently selling for $78. Stocks similar to Tyler earn returns ranging from 8% to 10%.

- Calculate value for a share of Tyler at interest rate of 8%. Round the answer to two decimal places.

$Calculate value for a share of Tyler at interest rate of 9%. Round the answer to two decimal places.

$Calculate value for a share of Tyler at interest rate of 10%. Round the answer to two decimal places.

$ - Do you think Tyler is a good investment for the long run – that is, for someone planning to hold onto it for 10 or more years?
- Do you think it’s a good investment for the short term? That is, should you buy it with the expectation of selling in a relatively short period, say a year or less?

- Repeat the calculations in part (a) assuming that instead of rising, Tyler’s growth rate remains at 4% or declines to 3%. Round your answers to two decimal places.
Growth rate of 4%, interest rate of 8%

$Growth rate of 4%, interest rate of 9%

$Growth rate of 4%, interest rate of 10%

$Growth rate of 3%, interest rate of 8%

$Growth rate of 3%, interest rate of 9%

$Growth rate of 3%, interest rate of 10%

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