Stock valuation | Business & Finance homework help
If you require a return of 9 percent on your investment, how much will you pay for the company’s stock today?
Q.2
Raffalovich, Inc., is expected to maintain a constant 5.45 percent growth rate in its dividends, indefinitely.
Required:
If the company has a dividend yield of 3.95 percent, what is the required return on the company’s stock?
Q.3
You’ve collected the following information from your favorite financial website.
52-Week Price
Stock (Div)
Div Yld %
PE Ratio
Close Price
Net Chg
Hi
Lo
79.3
10.62
Palm Coal 0.55
3.5
6
15.80
–0.24
55.81
33.42
Lake Lead Grp 1.54
3.8
10
40.43
–0.01
130.93
69.50
SIR 2.00
2.2
10
88.97
3.07
50.24
13.95
DR Dime 0.80
5.2
6
15.43
–0.26
35.00
20.74
Candy Galore 0.32
1.5
28
??
0.18
According to your research, the growth rate in dividends for Palm Coal for the previous 10 years has been 4.25 percent.
Required:
If investors feel this growth rate will continue, what is the required return for Palm Coal stock?
Q.4
Antiques ‘R’ Us is a mature manufacturing firm. The company just paid a dividend of $11.10, but management expects to reduce the payout by 5 percent per year, indefinitely.
Required:
If you require a return of 11 percent on this stock, what will you pay for a share today?
