Problem
A. Last year, PT Sinemaplex paid a Rp200,- per share dividend (Do). The company pledges to increase its dividend by 5 percent (g) per year indefinitely. If you require an 10 percent (R) return on your investment, how much will you pay for the company's stock today (use the constant growth model to value this stock)?
B. Rovio Entertainment Inc. is experiencing rapid growth. The company expects dividends to grow at 25 percent (g1) per year for the next 4 years before leveling off at 6 percent (g2 5 -dst) into perpetuity. The required return on the company's stock is 12 percent (R). If the dividend per share just paid was $1.74 (Do), what is the stock price?
C. The Ewald Company has just paid a cash dividend of $2.40 per share. If you want to buy Ewald's stock at the market, what would you pay for each share if you want a required return of your investment at 12 percent per annum? You believe that The Ewald Company will keep paying dividends at constant grow rate of 5 percent per annum.
D. Thomas Brothers is expected to pay a $0.50 per share dividend at the end of the year. The dividend is expected to grow at a constant rate of 7 percent a year. The required rate of return on the stock is 15 percent. What is the value per share of the company's stock?
E. Marcel Co. is growing quickly. Dividends are expected to grow at a 30 percent rate for the next three years, with the growth rate falling off to a constant 6 percent thereafter. If the required return is 13 percent and the company just paid a $1.80 dividend, what is the current share price?