• a-Suppose you expect Nike to pay an annualdividend of $0.49 per sharein the coming year and totrade $37.40 per shareat the end of the year. If investments with equivalent risk to Nike's stock have an expected return of5.60%,what is the most you would pay today for Nike's stock?What dividend yield and capital gain rate would you expect at this price?
• b-Consolidated Adidas, Inc., is a regulated utility company that services the New York City area. Suppose Adidas plans to pay$1.70 per share in dividendsin the coming year. If its equitycost of capital is 4%and dividends are expected togrow by 3% per year in the future, estimate the value of Adidas's stock.
• c-Crane Sporting Goods expects to have earningsper share of $8 in the coming year. Rather than reinvest these earnings and grow, the firm plans to pay out all of its earnings as a dividend. With these expectations of no growth,Crane's current share price is $55. Suppose Crane could cut its dividend payout rate to 75% for the foreseeable future and use the retained earnings to open new stores. The return on investment in these stores is expected to be 12%. If we assume that the risk of these new investments is the same as the risk of its existing investments, then the firm's equity cost of capital is unchanged. What effect would this new policy have on Crane's stock price?
• d-Suppose The Walt Disney Company plans topay $0.42 per share in dividendsin the coming year. If its equitycost of capital is 9.8%and dividends are expected togrow by 7.5% per yearin the future,estimate the value of Disney's stock.