XYZ Corporation preferred stock promises to pay a dividend of $3.25 per share at the end of each year forever. What is its value to an investor who requires a rate of return of 12%?
 
2. You are considering buying a share of DCU's common stock. You will hold it for 2 years and then sell it. You expect to get a dividend of $1.50 one year from today and a dividend of $1.75 two years from today. You expect to be able to sell the stock for $20 2 years from today. If you want a 10% rate of return, how much are you willing to pay today?
 
3. How much are you willing to pay today for a share of DCU Corp if its current dividend is $1.50 and dividends are expected to grow at an annual rate of 20% percent for the next 5 years? You want a return of 15%, and you expect to sell the share for $72 in 5 years.
 
4. What is the value of a share of stock to an investor who requires a 12% rate of return if the current dividend of $1.20 is expected to grow at 7% forever?
 
5. The current price of a share of DCU stock is $32.00, and the current dividend is $.60. What is the investor's required rate of return if the dividend is expected to grow forever at 8% per year?
 
6. The common stock of DCU is currently selling for $37.50 and pays a current annual dividend of $1.10. What is the implied constant growth rate of dividends if an investor's required rate of return is 14%?
 
7. You are valuing a share of DUC common stock. It is not currently paying dividends, but you think it will pay a dividend of $.50 4 years from today, $.50 5 years from today, and $.70 6 years from today. After Year 6, dividends will grow at 2% per year forever. If you want a 15% return, how much will you pay today for a share?

Answer rating: 100% (QA)

1 Calculate the value of a perpetuity In this case the value of the preferred stock is Value Dividend Required Rate of Return Value 325 012 Value 2708 Therefore the value of the XYZ Corporation prefer... View the full answer