1. The stock of Harris Inc. recently paid a dividend of $1.42. The growth rate of dividends has been 7%. Assuming the growth rate continues, what should be the price of the stock if investors demand a 12% rate of return? Show equation and work.
a. $22.50
b. $21.45
c. $26.50
d. $25.00
e. $30.39
2. ABC stock is expected to pay a dividend of $2.30 next year and continue to grow at a rate of 7% thereafter. What should be the price of the stock if investors demand a 14% rate of return? Show equation and work.
a. $28.75
b. $31.25
c. $32.86
d. $35.71
e. $38.33
3. A stock paid a dividend of $2.00 today P(0). If the growth rate of dividends is expected to be 8% and investors demand a 14% rate of return what will be the price of the stock in year 4? Show equation and work.
a. $48.98
b. $40.07
c. $30.42
d. $42.78
e. $33.46
4. A perpetual preferred stock pays a dividend of $2.92 per face value of $100. What is the price of the preferred stock if investors demand a 14% rate of return. Show equation and work.
a. $29.15
b. $35.00
c. $30.00
d. $20.71
e. $31.25
5. Harris company paid a dividend of 1.50 today. It expects dividend payments to increase by 15% every year for the next three years before resuming a normal growth of 6%. What should you pay for this stock if you demand a 16% rate of return? Show equation and work.
a. $21.24
b. $19.92
c. $26.65
d. $24.98
e. $23.25
6. Ray Inc. company is not expected to pay any dividends for three years while it attempts to restructure its business. They anticipate paying $1.20 in year four and thereafter growing at a rate of 6%. What should we pay for the stock if we demand a 15% rate of return? Show equation and work.
a. $8.77
b. $10.96
c. $14.24
d. $17.79
e. $9.50
7. A company has 200 shares. What is the minimum number of shares required for a minority shareholder to elect one board member out of 3 members to be elected? Show equation and work.
a. 51
b. 101
c. 41
d. 126
e. 76
8. Deep River company is expected to pay a dividend of $2.80 next year. Its dividends are expected to grow at a rate of 5%. If the price of the stock is $80, what rate of return are investors demanding? Show equation and work.
a. 9.00%
b. 8.43%
c. 8.50%
d. 8.68%
e. 9.62%