ch 8 3. Frey Corp. is experiencing rapid growth. Dividends are expected to grow
ID: 2654812 • Letter: C
Question
ch 8
3.
Frey Corp. is experiencing rapid growth. Dividends are expected to grow at 26 percent per year during the next three years, 16 percent over the following year, and then 6 percent per year indefinitely. The required return on this stock is 15 percent, and the stock currently sells for $74 per share. What is the projected dividend for the coming year? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
4. 4.
value:
2.00 points
You have found the following stock quote for RJW Enterprises, Inc., in the financial pages of today’s newspaper.
What was the closing price for this stock that appeared in yesterday’s paper? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
If the company currently has 17 million shares of stock outstanding, what was net income for the most recent four quarters? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
5.
Storico Co. just paid a dividend of $1.65 per share. The company will increase its dividend by 24 percent next year and will then reduce its dividend growth rate by 6 percentage points per year until it reaches the industry average of 6 percent dividend growth, after which the company will keep a constant growth rate forever. If the stock price is $42.54, what required return must investors be demanding on Storico stock? (Hint: Set up the valuation formula with all the relevant cash flows, and use trial and error to find the unknown rate of return.) (Do not round intermediate calculations and round your final answer to 1 decimal place. (e.g., 32.16))
Projected dividend $Explanation / Answer
3. Frey Corp. is experiencing rapid growth. Dividends are expected to grow at 26 percent per year during the next three years, 16 percent over the following year, and then 6 percent per year indefinitely. The required return on this stock is 15 percent, and the stock currently sells for $74 per share. What is the projected dividend for the coming year? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Current Stock Price = D1/1.15 + D1*(1.26)/1.15^2 + D1*(1.26)^2/1.15^3 + D1*(1.26)^2*1.16/1.15^4 + (D1*(1.26)^2*1.16*1.06/(15%-6%))/1.15^4
74 = D1 * (1/1.15 + 1*(1.26)/1.15^2 + 1*(1.26)^2/1.15^3 + 1*(1.26)^2*1.16/1.15^4 + (1*(1.26)^2*1.16*1.06/(15%-6%))/1.15^4 )
74 = D1* 16.320539
D1 = 74/16.320539
D1 = $ 4.53
Answer
Projected dividend = $ 4.53
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