1. The last dividend paid by Corporation was $1.00. Corporations growth rate is expected to be 5...
Question:
1. The last dividend paid by Corporation was $1.00. Corporation’s growth rate is expected to be 5 percent forever. Corporation’s required rate of return on equity is 12 percent. What is the current price of Corporation’s common stock?
2. Corporation has paid a $1.00 dividend every year on its preferred stock since its inception in 1967. Investors demand a 7 percent required return on the stock. What should Corporation’s stock trade for in the market?
3. The last dividend paid by Corporation was $1.00. Corporation’s growth rate is expected to be a constant 5 percent for two years, after which dividends are expected to grow at a rate of 10 percent forever. Corporation’s required rate of return on equity is 12 percent. What is the current price of Corporation’s common stock using the non-constant growth model?
4. Corporation just paid a dividend of $2.75 per share. The company will have a growth rate of 5%, 10%, 15%, and 20% for each of the next four years, respectively. After that, the company will keep a constant growth rate of 5 percent forever. If the required return on Corporation’s stock is 13 percent, what will a share of stock sell for today?
5. What is common stock and what is preferred stock? What are the similarities and differences between the two securities? Explain fully.
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw