What is the value of a stock?
1. Stock. What is the value of a stock with
a. $2 dividend just paid and an 8% required return with 0% growth?
b. $3 dividend just paid and a 9% required return with 1% growth?
c. $4 dividend to be paid and a 10% required return with 2% growth?
d. $5 dividend to be paid and a 11% required return with 3% growth?
2. Stock. What is the required rate of return on a stock with a
a. $1.5 expected dividend and a $19 price with 7% growth?
b. $1.75 expected dividend and a $25 price with 8% growth?
c. $2 expected dividend and a $26 price with 9% growth?
d. $2.25 expected dividend and a $33 price with 10% growth?
3. Stock. What is the growth rate of the stock with a
a. $2.50 expected dividend and a $30.60 price with 15% required return?
b. $2 expected dividend and a $25.35 price with 12% required return?
c. $3 expected dividend and a $10.40 price with 11% required return?
d. $1.77 expected dividend and a $50.20 price with 14% required return?
4. Stock price. What is the value of a stock with high growth then constant growth,
a. dividends of $1.50, $3.00, and $6.00, constant growth at 4% and a required return of 6%?
b. dividends of $2.50, $3.50, and $5.00, constant growth at 3.5% and a required return of 8%?
c. dividends of $1.50, $3.00, and $6.00, constant growth at 5% and a required return of 10%?
d. dividends of $2.50, $3.50, and $5.00, constant growth at 7% and a required return of 12%?
I need someone to explain how to get the answeres to these questions, I have seen the formulas and yet I still cant figure them out.
thanks john I agree with you, and I have been trying to figure this out, and the problem is as you have stated in all your questions, There are so many ways to look at it.
- John WLv 79 years agoFavorite Answer
You know Bret, you'll get more of your cheating down on your homework if you actually posted them in sizes that can be answered on Yahoo Answers. They have a limit as to how long our responses can be and attempting answer your massive postings of your homework exceeds that limit. You're the one that loses out by not doing your homework. We actually gain by practice.
We actually have no idea of what your instructor is trying to teach you, the people in business and economics particularly those teaching the introductory levels are of questionable competence. For example, in the first question, two parts have the dividends already paid and the other two parts have the dividends about to be paid. If the goal was to neglect the dividends then there is no metric to estimate what the stock price is therefore you can only calculate the current price as a ratio of it's future price in order to meet the required investment goals however if it's assumed that the dividends are part of the yield then an actual value can be arrived at instead of a ratio. For example for 1a, to meet the condition of a 8% yield but with 0% growth, the current price would have to be 0.9259 that of the price in one years time to give you an 8% yield, a bit of an oxymoron since there's allegedly 0% growth; if the $2 dividend is to be considered part of the yield i.e.: the stock is purchased before the dividend was issued which the question state isn't the case, then you can size the stock price such that the $2 represents 8% of the stock price giving you the 8% yield without a requirement for a change in price hence meeting the 0% growth criteria, i.e.: the price would be $25. So does your instructor expect the answer that it's not possible to have that yield, does he assume that you will receive that yield within the year? Is the growth that of the stock value or of the dividend? Why the distinction between dividend just being paid and about to be paid? Is the dividend being reinvested hence the distinction between receiving it at the beginning of the one year term or at the end? Is it a matter of calculating what the applicable dividend payment will be after the growth has been applied? Only someone in your course can answer what the context of the questions are.