An investor purchases a stock with a constant dividend of $10/year for a price of $85.  What is the investors rate of return for the stock?

 

2. A stock paid a $3.50 dividend last year.  The dividend is expected to grow at a rate of 2% per year.  What are the next 3 dividends that an investor is expecting to receive?

 

3. A company announces it will pay a $2 and then plans to grow the dividend by 4% a year for the foreseeable future.  If an investor requires a 15% rate of return, what is the maximum price the investor should pay for the stock?

 

4. The price of a stock is $65 and is expected to pay a dividend of $5 that will grow at a 3% rate.  If the investor requires an 11% rate of return, should the investor purchase the stock?

 

5. The stock is currently selling of $112.50 and pays a dividend of $6.50.  If dividends grow at a constant 4% rate, what is the stock's expected dividend yield, capital gains return, and rate of return?

 

6. A company announced that it will start to pay a dividend next year and forecasted dividends for the next several years as follows:
 

Year 1:  $2.00

Year 2:  $4.00

Year 3:  $7.00

Year 4:  $10.00

Year 5:  $12.00

After which it expects dividends to grow by 3%.  If the required rate of return is 12%, what is the expected value of the stock in year 5 and what is the value of the stock today?

Answer rating: 100% (QA)

1 Calculate the investors rate of return for the stock Dividend Yield Annual Dividend Purchase Price In this case the annual dividend is 10 and the purchase price is 85 Dividend Yield 10 85 Dividend Y... View the full answer