Question 1 A company’s preferred stock pays a fixed dividend of $1.4 per share f

Question

Question 1 A company’s preferred stock pays a fixed dividend of $1.4 per share forever. The market uses a discount rate of 7%. What is the price of this preferred stock? Answer: $______________

Question 2 (1 point) A company will pay a dividend of $0.90 next year and the dividend is expected to grow at a constant rate of 3% forever. The market is expected to use a discount rate of 10% to value the stock. What is the price of the stock? Answer: $______________

Question 3 (1 point) The market price of a stock is $15.50 and it is expected to pay a $1.20 dividend next year. The dividend is expected to grow at 3% forever. What is the required rate of return for the stock? Answer: ______________%

Question 4 (1 point) A firm just paid a dividend of $1.40. The dividend is expected to grow at a constant rate of 4% forever and the required rate of return is 15%. What is the value of the stock? Answer: $______________

Question 5 (1 point – Partial Credits) A firm just paid a dividend of $2. The dividend is expected to grow at 25% for next two years and then grow at 2% thereafter. The required rate of return on the stock is 11%. What is the value of the stock? (0.5 points) The amount of dividend at t = 3 is $______________ (0.5 points) What is the value of the stock today? Answer: $______________

Question 6 (1 point) The risk free rate in the economy is 1.00% and the market risk premium is 5.00%. If an analyst estimates that a company’s (beta) is 0.9, what is the expected return on the company’s stock? Answer: ______________%

Explanation / Answer

Question 1 A company’s preferred stock pays a fixed dividend of $1.4 per share forever. The market uses a discount rate of 7%. What is the price of this preferred stock?

Price of this preferred stock = Constant Dividend/Discount rate

Price of this preferred stock = 1.4/7%

Price of this preferred stock = $ 20

Question 2 (1 point) A company will pay a dividend of $0.90 next year and the dividend is expected to grow at a constant rate of 3% forever. The market is expected to use a discount rate of 10% to value the stock. What is the price of the stock?

Price of the stock = Expected Dividend/(Required rate - growth rate)

Price of the stock = 0.90/(10%-3%)

Price of the stock = $ 12.86

Question 3 (1 point) The market price of a stock is $15.50 and it is expected to pay a $1.20 dividend next year. The dividend is expected to grow at 3% forever. What is the required rate of return for the stock?

Required rate of return = Expected Dividend/market price of a stock + growth rate

Required rate of return = 1.20/15.50 + 3%

Required rate of return = 10.74%

Question 4 (1 point) A firm just paid a dividend of $1.40. The dividend is expected to grow at a constant rate of 4% forever and the required rate of return is 15%. What is the value of the stock?

value of the stock = Expected Dividend/(Required rate - growth rate)

value of the stock = (1.40*1.04)/(15%-4%)

value of the stock = $ 13.24

Note : Please don't ask multiple question in single question, Please ask seperately

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