Question 1: TR Incorporated is expected to pay a dividend (D1) of R3.00 next year with the growth in dividends expected to remain constant at 5%. The required rate of return is 10%. Calculate TR's share price today.
Question 2: LG Corp. anticipates a non-constant growth pattern for dividends. Dividends are expected to be $1.30 next year followed by a 15% growth rate until the end of year five. At this time, dividends will grow at a 5% rate for the foreseeable future. Use a discount rate of 12% throughout your analysis to value the share.
Question 3: PSG expects to have earnings per share of $5.25 in 2005 and $5.65 in 2006 The average price-earnings ratio for the storage industry is 10X (times). PSG has traditionally had a P/E ratio 12% higher than the industry and in 2005 it is expected to be 15% higher than the industry. Calculate the expected price of Pacific's stock price in 2005 and 2006 based on expectations of EPS and P/E ratios.
Question 4: Consider a company that earns R5 per share and pays a R0.50 dividend. The management indicated an expected growth rate of 23%. If the firm earns a 25% return on equity, can the firm grow with internal funds or will it need additional capital?