Problem 1:
SameOld, Inc. has been expanding a relatively constant annual rate and it recently paid a dividend noted below. However, investors expect SameOld to continue paying dividends, which are expected to grow at the historical rate given below. If the required return on the stock is rs, what is the value of the stock today (P0)?
| INPUT DATA |
D0 |
$0.48 |
g |
0.00% |
rS |
14% |
Problem 2:
WTF is expanding rapidly, and it currently needs to retain all of its earnings, hence it does not pay any dividends. However, investors expect WTF to begin paying dividends, with the first dividend D2 coming 2 years from today. The dividend should grow rapidly--at a rate of g3,4 per year--during years 3 and 4. After year 4, the company should grow at a constant rate of g per year. If the required return on the stock is rs, what is the value of the stock today (P0)?
| INPUT DATA |
D2 |
$0.25 |
g3,4 |
25% |
g |
3.50% |
| |
|
|
|
rS |
14% |
|
|
Problem 3:
You buy a share of The GLS Corporation stock for the market price, P0. You expect it to pay dividends each year, including a dividend of D3 in Year 3, and each of the dividends has grown at the historical constant growth rate. You expect to sell it at a price P3 at the end of three years. Calculate the growth rate, the expected dividend yield, and the stock's expected total rate of return.
| INPUT DATA |
D3 |
$0.79 |
P0 |
$18.00 |
P3 |
$19.48 |
Attachment:- Assignment.rar