QUESTION 1 Trust Bankers just paid an annual dividend of $1.7 per share. The exp

Question

QUESTION 1

Trust Bankers just paid an annual dividend of $1.7 per share. The expected dividend growth rate is 5.7 percent, the discount rate is 11 percent, and the dividends will last for 7 more years. What is the value of the stock?

QUESTION 2

A share of stock will pay a dividend of $1.1 one year from now, with dividend growth of 4.4 percent thereafter. According to the constant dividend growth model, if the required return is 14.7 percent, what should the value of the stock be 2 years from now?

QUESTION 3

A share of stock just paid a dividend of $1.6, with an expected dividend growth of 5.8 percent forever. According to the constant perpetual growth model, if the required return is 14.2 percent, what should the value of the stock be 4 years from now?

QUESTION 4

If the return on equity for a firm is 14 percent and the retention ratio is 39 percent, what is the percentage sustainable growth rate of earnings and dividends?

QUESTION 5

The dividend for Weaver, Inc., is expected to grow at 19 percent for the next 4 years before leveling off at a 5.5 percent rate indefinitely. If the firm just paid a dividend of $1.49 and you require a return of 10 percent on the stock, what is the most you should pay per share?

QUESTION 6

Bill’s Bakery expects earnings per share of 5 = $5 next year. Current book value is $4.4 per share. The appropriate discount rate for Bill's Bakery is 12.9 percent. Calculate the share price for Bill's Bakery if earnings grow at 4.1 percent forever.

Explanation / Answer

As per Chegg guidelines we answer one question per post. But I have answered 3questions in one post. Kindly post remaining questions in separate post Q4 ROE 14% Retention Ratio 39% Growth Rate = 14%*39% = 5.46 Q5 Statement showing calculation of Price of Stock Particulars Time PVF@10% Amount PV(Amount *PVF) Cash inflows Dividend (1.49*1.19)                     1.000                  0.9091                       1.77                                1.61 Cash inflows Dividend (1.49*1.19*1.19)                     2.000                  0.8264                       2.11                                1.74 Cash inflows Dividend (1.49*1.19*1.19*1.19)                     3.000                  0.7513                       2.51                                1.89 Cash inflows Dividend (1.49*1.19*1.19*1.19*1.19)                     4.000                  0.6830                       2.99                                2.04 Cash inflows Price = 2.99*1.055/(10%-5.5%)                     4.000                  0.6830                     70.10                             47.88 PV of Stock Price                             55.16 Q6 EPS at end of year                       5.00 Assuming all earnings are paid out therefore D1 = 5 ke 12.90% g 4.10% P = D1/(ke-g) P = 5/(12.90%-4.10%) P = 56.82

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