1. The current price of Janco stock is $23.34. Dividends are expected to grow at 6.26% indefinitely and the most recent dividend paid yesterday was $3.72. Compute the following for Janco stock:
a) The required rate of return:
b) The dividend yield:
c) Capital gains yield:
2. Magnetic Corporation expects dividends to grow at a rate of 18.69% for the next two years. After two years, dividends are expected to grow at a constant rate of 3.25% , indefinitely. Magnetic’s required rate of return is 13.20% and they paid a $1.86 dividend today. Compute the following for Magnetic Corporation’s common stock:
a) Dividend at end of year 1 :
b) Dividend at end of year 2 :
c) Dividend at end of year 3 :
d) Price of stock at end of year 2 :
e) Price of stock today :