‘8 young start-up company. on the stock over the next itm needs to plow back its S erowth. The company will pay $0.84 as igend in year 10 and will increase the requited regs eat Pet Year thereafter. Ifthe Mec is stock is 13 percent, what is the Question 2 sank of Fast Growth has just issued some new Borcet stocks. The issue will pay an annual ividend of $0.81 in perpetuity, beginning six years from now. If the market requires a 7 percent return ‘on this investment, how much does a share of Preferred stock cost today? yyw kslan we Question 3 Venus Corporation has preferred stock outstanding that pays an annual dividend of $12. It has a price of S110. What is the required rate of return on the preferred stock? Question 4 Static Co. currently pays a $2.10 annual cash fdend. It plans to maintain the dividend at this el for the foreseeable future as no future growth is Ifthe required rate of return by common is 12 percent, what is the price of the b) Assume the required rate of return goes up t0 12 percent. What will be the new value of the ‘common stock? 6) Assume the growth rate goes up to 7 percent what will be the new value of the common stock? 4d) Assume the dividend is $2, compute the new value of the common stock. Question 7 AA firm pays a $4.90 dividend at the end of year one, has a stock price of $70 and a constant growth rate of 6 percent. Compute the required rate of return Question 8 ABC's stock dividend at the end of this year is expected to be $2.15, and it is expected to grow at 11.2% per year forever. If the required rate of return on ABC stock is 15.2% per year, what is its current market price? Question 9 ‘A firm’s common stock is currently selling for $12.50 per share. The required rate of return is 9% and the company will pay an annual dividend of $0.50 per share one year from now which will grow at a constant rate for the next several years. What is the growth rate? Question 10 You plan to invest in Co and you have two options. First, you can buy the preferred stock of the ‘company at a price of $1.20 now and expect to get a dividend of $0.15 per year, forever. Second, you can buy the ordinary shares of the company at a price of $1.50, will get a dividend of $0.20 hext year and the dividend is expected to grow at 3% forever. If you require a return of 15%, which stock should you buy?A Chat Une = Yio fo. los fy sto Pa te Thonn We UF on Live) bolt - L36 Was 1S a O13 = beg ee Aiose A, . he cute = He.co Dae ae 2 wher °, bs io. ok : Cl4e.13)* (ea) 243.50 po Pio ont y aiden, will Six Sewer (yelled thee Bs fo, Ist Fueiis4 (Utter Nes 26-2 ohn: A 2 bs