Project #37117 - Equity Markets and Stock Valuation

1.

E-Eyes.com has a new issue of preferred stock it calls 20/20 preferred. The stock will pay a $20 dividend per year, but the first dividend will not be paid until 20 years from today.

 
Required:
 

If you require a return of 9.00 percent on this stock, how much should you pay today? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

 
  Current stock price   
 
2.
 
 
 
 

Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next eight years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $14.00 per share 9 years from today and will increase the dividend by 5.75 percent per year thereafter.

 
Required:

If the required return on this stock is 13.75 percent, what is the current share price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

   
  Current share price   

 

3. 

 

Apocalyptica Corporation is expected to pay the following dividends over the next four years: $5.80, $16.80, $21.80, and $3.60. Afterwards, the company pledges to maintain a constant 5.75 percent growth rate in dividends, forever.

 
Required:

If the required return on the stock is 8 percent, what is the current share price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

   
  Current share price  $   

 

4.

ang Corp. is growing quickly. Dividends are expected to grow at a rate of 31 percent for the next three years, with the growth rate falling off to a constant 7.1 percent thereafter.

 
Required:

If the required return is 12 percent and the company just paid a $2.55 dividend, what is the current share price? (Hint: Calculate the first four dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

   
  Current share price  

 

5. 

 

Gontier Corporation stock currently sells for $64.18 per share. The market requires a return of 12 percent on the firm’s stock.

Required:

If the company maintains a constant 5.75 percent growth rate in dividends, what was the most recent dividend per share paid on the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

  Dividend per share  $   

 
6.
 

Davis, Inc., currently has an EPS of $2.01 and an earnings growth rate of 8 percent. The benchmark PE ratio is 24.


Required:

What is the target share price in 6 years? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)


  Projected stock price   
 
7. 
 
Sully Corp. currently has an EPS of $2.51, and the benchmark PE ratio for the company is 21. Earnings are expected to grow at 6 percent per year.

Requirement 1:

What is your estimate of the current stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)


  Stock price

Requirement 2:

What is the target stock price in one year? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)


  Stock price in one year $

Requirement 3:

Assuming that the company pays no dividends, what is the implied return on the company's stock over the next year? (Do not round intermediate calculations. Round your answer to 1 decimal place (e.g., 32.2).)


  Implied return %

Subject Business
Due By (Pacific Time) 08/04/2014 04:00 pm
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