P

$6$:$04$

$454$

Problem Set $1\_$SectionB.pdf

grow at a rate of $16\%$ during the next $2$ years, at $14\%$ the following year, and at a constant rate of $8\%$ during Year $4$ and thereafter. Its last dividend was $$1\mathrm{.}55,$ and its required rate of return is $12\%.$

a$.$ Calculate the value of the stock today.

b$.$ Calculate $P_1$ and $P_2($Prices for Year $1$ and Year $2).$

c$.$ Calculate the dividend and capital gains yields for Years $1,2,$ and $3.$

$4.(15$ percent$)$ Bayou Okra Farms just paid a dividend of $$3\mathrm{.}60$ on its stock. The growth rate in dividends is expected to be a constant $7$ percent per year indefinitely. Investors require a return of $15$ percent for the first three years, a return of $13$ percent for the next three years, and a return of $11$ percent thereafter. What is the current share price?

$5.(15$ Percent$)$ You must analyze a project for a firm. The firm's WACC is $11\mathrm{.}5\%,$ and the expected cash flows of the project are as follows:

$\backslash$table$[[$Year$,0,1,2,3,4],[$Cash Flow,$-$$$11,000,$$$6,500,$$$3,000,$$$3,000,$$$1,000$