1.

Your discount brokerage firm charges $8.40 per stock trade. |

How much money do you need to buy 260 shares of Pfizer, Inc. (PFE), which trades at $33.82? |

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)? |

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. |

Dividends | Years |

First year | $ |

Second year | $ |

Third year | $ |

Fourth year | $ |

Fifth year | $ |

Compute the value of this stock price in five years. |

Stock price | $ |

Calculate the present value of these cash flows using a 9 percent discount rate. |

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.

Your discount brokerage firm charges $8.35 per stock trade. |

How much money do you need to buy 350 shares of Time Warner, Inc. (TWX), which trades at $28.12? |

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? |

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. |

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? |

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? |

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? |

Shareholders return | % |

Subject | Business |

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

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