1. Boring, Inc. has just paid a dividend of $1.50 per share on its stock. Dividends are expected to grow at a constant rate of 5 percent indefinitely. If the required return is 10% on the shares,

to. What is the current stock price (P0)?

b. What will the price be in three years (P3)?

(Hint for a and b: use the constant dividend model)

2. The next dividend payment from Nespresso Co. will be $2.00 per share. Dividends are expected to grow at 5% forever. If the stock is currently selling for $100 per share,

to. What is the required return (r)?

b. What is the dividend yield?

C. What is the return on goodwill?

3. How much are you willing to pay for a share of Salmon Brothers Co. today if the company just paid an annual dividend of $0.70, dividends grow 2 percent per year, and you need a 10 percent rate of return? (Calculate P0)

4.Netflix Corp. has just paid a dividend of $1.30 per share. Dividends are expected to grow at 23% over the next 8 years and then stabilize at a 6% growth rate forever. If the required return is 12%, what is the share price today (P0)? (Hint: two-stage growth model)

5. Sally Corp. currently has an EPS of $3.00 and the baseline PE for the company is 41. Earnings are expected to grow 4 percent per year. to. What is your estimate of the current stock price (P0)? b. What is the target price of the stock in year 4 (P4)?

Answer rating: 100% (QA)

1 a The current stock price P0 can be calculated using the constant dividend model P0 D r g Where D dividend per share 150 r required return 10 g divi... View the full answer