# Project #93505 - Finance Homework

Fill in the blanks:

 1 Favored stock will pay a dividend this year of \$1.76 per share. Its dividend yield is 8%. At what price is the stock selling? (Do not round intermediate calculations.)

 Current price \$

 2 Preferred Products has issued preferred stock with an annual dividend of \$7.92 that will be paid in perpetuity. a. If the discount rate is 11%, at what price should the preferred sell? Current price \$ b. At what price should the stock sell 1 year from now? Future price \$ c. What is the dividend yield, the capital gains yield, and the expected rate of return of the stock? (Leave no cells blank - be certain to enter "0" wherever required. Enter your answers as a whole percent.) Dividend yield % Capital gains yield % Expected rate of return %

2

 3 Steady As She Goes Inc. will pay a year-end dividend of \$2.10 per share. Investors expect the dividend to grow at a rate of 5% indefinitely.

 a. If the stock currently sells for \$21 per share, what is the expected rate of return on the stock? (Do not round intermediate calculations. Enter your answer as a whole percent.)

 Expected rate of return %

 b. If the expected rate of return on the stock is 17.5%, what is the stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 Stock price \$

 4 Integrated Potato Chips paid a \$1.70 per share dividend yesterday. You expect the dividend to grow steadily at a rate of 5% per year.

 a. What is the expected dividend in each of the next 3 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

 Expected Dividend Year 1 \$ Year 2 Year 3

 b. If the discount rate for the stock is 11%, at what price will the stock sell today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 Current price \$

 c. What is the expected stock price 3 years from now? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 Future price \$

 d. If you buy the stock and plan to hold it for 3 years, what payments will you receive? What is the present value of those payments? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 2 decimal places.)

 d. If you buy the stock and plan to hold it for 3 years, what payments will you receive? What is the present value of those payments? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 2 decimal places.)

 Year 1 Year 2 Year 3 Dividend \$ \$ \$ Sale of stock Total cash flow \$ \$ \$ PV of cash flow \$ \$ \$

 5 Stormy Weather has no attractive investment opportunities. Its return on equity equals the discount rate, which is 5%. Its expected earnings this year are \$2 per share. Find the stock price, P/E ratio, and growth rate of dividends for plowback ratios of: (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Enter the growth rate as a percent rounded to 1 decimal place.)

 Plowback Ratios Stock Price P/E Ratio Growth Rate of  Dividends a. Zero \$ % b. .20 % c. .70 %

 6 Arts and Crafts, Inc., will pay a dividend of \$2 per share in 1 year. It sells at \$40 a share, and firms in the same industry provide an expected rate of return of 14%. What must be the expected growth rate of the company’s dividends? (Do not round intermediate calculations. Enter your answer as a whole percent.)

 Expected growth rate %

 7 No-Growth Industries pays out all of its earnings as dividends. It will pay its next \$6 per share dividend in a year. The discount rate is 21%.

 a. What is the price-earnings ratio of the company? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 P/E ratio

 b. What would the P/E ratio be if the discount rate were 20%? (Round your answer to 2 decimal places.)

 P/E ratio

 Subject Business Due By (Pacific Time) 11/15/2015 6pm
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