1. If the dividend yield for Year 1 is expected to be 5% based on the current price of $25, what will the Year 4 dividend be if dividends grow at a constant 6%?
2. What price would you expect to pay for a stock with 13% required rate of return, 4% rate of dividend growth, and an annual dividend of $2.50 which will be paid tomorrow?
3. Cambridge Motors common stock is expected to have extraordinary growth of 20% per year for 2 years, at which time the growth rate will settle into a constant 6%. If the discount rate is 15% and the most recent dividend was $2.50, what should be the approximate current share price?
4. What would be the approximate expected price of a stock when dividends are expected to grow at a 25% rate for 3 years, then grow at a constant rate of 5%, if the stock's required return is 13% and next year's dividend (D1) will be $4.00?
5. What should be the price of a stock that offers a $4 annual dividend with no prospects of growth (therefore g = 0), and has a required return of 12.5%?
6. What is the value of the expected dividend per share for a stock that has a required return of 16%, a price of $45, and a constant-growth rate of 12%?
7. Develop a current stock value for a firm that is expected to have extraordinary growth of 25% for 4 years, after which it will face more competition and slip into a constant-growth rate of 5%. Its required return is 14% and next year's dividend is expected to be $5.00.
8. A stock is expected to pay a year-end dividend of $2.00, i.e., D1 = $2.00. The dividend is expected to decline at a rate of 5% a year forever (g = -5%). If the company is in equilibrium and its expected and required rate of return is 15%, what would be your best estimate of this stock's market price one year from today (P1)?
9. Dyer Furniture is expected to pay a dividend of D1 = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company's beta is 1.15, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is Dyer's current stock price?
10. Kellner Motor Co.'s stock has a required rate of return of 11.50%, and it sells for $25.00 per share. Kellner's dividend is expected to grow at a constant rate of 7.00%. What was the last dividend, D0?
11. Suppose a company just paid a dividend of D0 = $1.32. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on this low-risk stock is 9.00%. What is the best estimate of the stock's current market value?