You've collected the following information from your favorite financial website.
| 52-Week Price |
Stock (Div) |
Div
Yld % |
PE
Ratio |
Close
Price |
Net
Chg |
| Hi |
Lo |
| 36.99 |
13.09 |
Arch Coal 0.44 |
3.0 |
20.0 |
14.53 |
0.25 |
| 32.90 |
42.81 |
Laclede Grp 1.66 |
4.0 |
14.2 |
41.60 |
-0.31 |
| 194.90 |
151.71 |
IBM 3.00 |
1.6 |
14.7 |
192.37 |
1.91 |
| 41.86 |
23.44 |
JC Penney 0.80 |
1.9 |
45.8 |
41.77 |
0.35 |
| 29.92 |
22.82 |
Tootsie Roll 0.32 |
1.3 |
33.9 |
?? |
-0.19 |
(1) According to your research, the growth rate in dividends for JC Penney for the previous 10 years has been -7.5 percent.
If investors feel this growth rate will continue, what is the required return for JC Penney stock?
(2) Using the dividend yield, calculate the closing price for Tootsie Roll on this day.
Stock price $
Assume the actual closing price for Tootsie Roll was $24.48. Your research projects a 5.5 percent dividend growth rate for Tootsie Roll. What is the required return for the stock using the dividend discount model and the actual stock price?