Stock problems. 1. You expect GDL to pay a dividend of $1.5 in one year, $2.4 in

Question

Stock problems.

1. You expect GDL to pay a dividend of $1.5 in one year, $2.4 in two years and $4 in 3 years. After that, you think dividends will grow at a constant rate of 6%. You require a return of 10% to invest in GDL. What is the expected price of the company next year? Answer to 2 decimal places, for example 39.12.

2. Warren Buffet is one famous example of an investor who relies on:

3. Which of the following is the method that uses an analysis of charts and trading patterns to determine when to invest in a stock?

Explanation / Answer

Ans 1) Present value = dividend at year/( 1 + required return) + ........ + terminal dividend/(1+required return) ^n

Present value = 1.5/(1.1) + 2.4/(1.1)^2 + 4/(1.1)^3 + (4*1.06/(.1 - .06))/(1.1)^3

= $85.99

Expected price of company in next year = $85.99 * 1.1 = $94.59

2) Fundamental Analysis: when person select stock on the basis of intrinsic value by analyzing balance sheet, income statment and other financial and economic factors.

3) Technical Analysis: it is analysis of trends and chart

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.