GDL just paid a dividend of $4 per share. Investors expect the company\'s divide
ID: 2615108 • Letter: G
Question
GDL just paid a dividend of $4 per share. Investors expect the company's dividends to grow at a constant rate of 3% per year, and they require a 12% return to invest in the stock.What is the expected price of GDL 1 year from now?
Suppose GDL just paid a dividend of $2 and the required return on the stock is 13%. What growth rate must investors expect if the stock currently sells for $56?Answer to 4 decimal places, for example 0.1234.
FSL is expected to pay a dividend of $2 one year from now. Dividends are expected to grow at 4% per year, and the required return on the stock is 15%. What is the expected price of the stock 2 years from now?Answer to 2 decimal places, for example 42.12.
A stock sells today for $58, and just paid a dividend of $5. If the growth rate is 4%, what is the required return on the stock?Answer to 4 decimal places, for example 0.1234.
A company's dividends are getting smaller at a constant rate of 2% (this growth rate is negative). The company just paid a dividend of $9 and the required return is 13%. What is the price of the company's stock today? Answer to 2 decimal places, for example 59.12.
Suppose the goddess tells you the following information about a stock:
Year
Dividend
1
$1
2
$3
3
$5
She also tells you that the stock will sell for $53 at three years from now. If you require a 9% return to invest in this stock, what is the most you would be willing to pay for it today? answer to 2 decimal places, for example 49.12.
Suppose the goddess tells you the following information about a stock:
Year
Dividend
1
$1
2
$3
3
$4
She also tells you that the stock will sell for $59 at three years from now.If you require a 14% return to invest in this stock, what do you expect the price of the stock to be one year from now (P1)? Answer to 2 decimal places, for example 49.12.
You expect GDL to pay a dividend of $1 in one year, $4 in two years and $5 in 3 years. After that, you think dividends will grow at a constant rate of 5%. You require a return of 13% to invest in GDL. How much would you pay for a share of the company today? Answer to 2 decimal places, for example 39.12.
You buy GBT for $41. One year later, you collect a dividend of $4 and sell the share for $60. What is your percent capital gain on this investment? Answer to 4 decimals, for example 0.4321.
JBT company just paid a dividend of $2. Dividends will grow at a constant rate of 2% forever, and the required return for the company is 13%. Suppose you buy the stock at these conditions today, but one year later investors suddenly expect the growth rate in the stock to be 5%. What is your rate of return on this investment if you sell the shares one year later? Answer to 4 decimal places, for example 0.
Year
Dividend
1
$1
2
$3
3
$5
Explanation / Answer
I have answered the 1st 5 parts of the question.
1 Dividend (D0)= 4 per share Growth Rate (g)= 3% per year Rate of return ('r)= 12% Dividend for next year (D1)= D0*g = 4*103% = 4.12 Price of the share = D1/r-g = 4.12/(0.12-0.03) = 45.78 Future value of Price at end of Year 1= 45.78*(1+0.12) Future value of Price at end of Year 1= 51.27 2 Dividend (D0)= 2 per share Rate of return ('r)= 13% Price (P)= 56 Price of the share (P)= D1/r-g P= D0*(1+g)/(r-g) 56= 2*(1+g)/(0.13-g) 56*(0.13-g)= 2+2g 7.28-56g= 2+2g 58g= 5.28 g= 5.28/58 g= 0.0910 g= 9.10% 3 Dividend for next year (D1)= $2 per share Growth (g)= 4% Rate of Return ('r)= 15% Current Price of the share = D1/r-g = 2/(0.15-0.04) = 18.18 Future value of Price at end of Year 2= 18.18*(1+0.15)^2 Future value of Price at end of Year 1= 24.04 4 Current Price (P0)= 58 Dividend (D0)= 5 Growth Rate(g)= 4% Dividend for next year (D1)= D0*g Dividend for next year (D1)= 5*(104%) = 5.2 Current Price of the share (P0)= D1/r-g 58= 5.2/(r-0.04) 58*(r-0.04)= 5.2 58r-2.32= 5.2 58r= 7.52 r= 7.52/58 r= 0.1297 r= 12.97% 5 Growth (g)= -2% Dividend (D0)= 9 Required Rate of Return ('r)= 13% Dividend for next year (D1)= D0*g Dividend for next year (D1)= 9* 98% D1 8.82 Current Price of the share (P0)= D1/r-g Current Price of the share (P0)= 8.82/(0.13-(-0.02)) = 58.80Related Questions
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