A stock is expected to pay dividends of $2.00 and $2.20 in the next two years and sell for a price of $45 at the end of two years. What will an investor who expects a 10 percent rate of return be willing to pay for this stock?

A stock is expected to pay dividends of $.85 and $.90 in the next two years and sell for a price of $25 at the end of two years. What will an investor who expects  12 percent rate of return be willing to pay for this stock?

Filmore west pays a $3 dividend right now and its stock sells for $43. The best estimate of Fillmore's required return is 13 percent. What is Fillmore's constant growth rate?

A company pays out all its earnings as dividends. It will pay its next $2.50 per share dividend in a year. The discount rate is 8 percent. What is the price-earnings ratio?

Answer rating: 100% (QA)

SOLUTION To calculate the price an investor would be willing to pay for the stock we can use the dividend discount model P D1 1 r D2 1 r2 P2 1 r2 wher... View the full answer