# Project #42457 - Chapter 8

1.

 How much money do you need to buy 260 shares of Pfizer, Inc. (PFE), which trades at \$33.82? (Round your answer to 2 decimal places.)

 Amount needed \$

2.

 Consider a firm that had been priced using a 10 percent growth rate and a 12 percent required return. The firm recently paid a \$1.20 dividend. The firm just announced that because of a new joint venture, it will likely grow at a 10.5 percent rate.

 How much should the stock price change (in dollars and percentage)? (Round your answers to 2 decimal places.)

 Change in stock price \$ Change in stock percent %

3.

 Suppose that a firm’s recent earnings per share and dividend per share are \$3.10 and \$2.50, respectively. Both are expected to grow at 7 percent. However, the firm’s current P/E ratio of 26 seems high for this growth rate. The P/E ratio is expected to fall to 22 within five years.

 Compute the dividends over the next five years. (Do not round intermediate calculations and round your final answers to 3 decimal places.)

 Dividends Years First year \$ Second year \$ Third year \$ Fourth year \$ Fifth year \$

 Compute the value of this stock price in five years. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

 Stock price \$

 Calculate the present value of these cash flows using a 9 percent discount rate. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

 Present value \$

4.

 Financial analysts forecast Safeco Corp.’s (SAF) growth rate for the future to be 13 percent. Safeco’s recent dividend was \$1.70.

 What is the value of Safeco stock when the required return is 15 percent?

 Value of stock \$

5.

 How much money do you need to buy 350 shares of Time Warner, Inc. (TWX), which trades at \$28.12?(Round your answer to 2 decimal places.)

 Amount needed \$

6.

 A firm recently paid a \$0.60 annual dividend. The dividend is expected to increase by 12 percent in each of the next four years. In the fourth year, the stock price is expected to be \$42.

 If the required return for this stock is 14.50 percent, what is its current value? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

 Current value \$

7.

 A firm is expected to pay a dividend of \$1.95 next year and \$2.10 the following year. Financial analysts believe the stock will be at their price target of \$70 in two years.

 Compute the value of this stock with a required return of 11.9 percent. (Round your answer to 2 decimal places.)

 Value of stock \$

8.

 You would like to buy shares of Sirius Satellite Radio (SIRI). The current ask and bid quotes are \$4.18 and \$4.15, respectively. You place a market buy order for 590 shares that executes at these quoted prices.

 How much money did it cost to buy these shares? (Round your answer to 2 decimal places.)

 Cost of shares \$

9.

 A preferred stock from Hecla Mining Co. (HLPRB) pays \$3.70 in annual dividends.

 If the required return on the preferred stock is 6.70 percent, what is the value of the stock? (Round your answer to 2 decimal places.)

 Value of stock \$

10.

 Ecolap Inc. (ECL) recently paid a \$0.50 dividend. The dividend is expected to grow at a 14.50 percent rate. The current stock price is \$52.12.

 What is the return shareholders are expecting? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

 Shareholders return %

 Subject Business Due By (Pacific Time) 10/10/2014 12:00 am
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