Tre-Bien, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the next two years, then a growth rate of 17 percent for the following two years. After that, a constant-growth rate of 8 percent is expected. The firm expects to pay its first dividend of $2.26 a year from now. If dividends will grow at the same rate as the firm and the required rate of return on stocks with similar risk is 22 percent, what is the current value of the stock?
You own a company that competes with Old World DVD Company. Instead of selling DVDs, however, your company sells music downloads from a Web site. Things are going well now, but you know that it is only a matter of time before someone comes up with a better way to distribute music. Your company just paid a $2.38 per share dividend, and you expect to increase the dividend 11 percent next year. However, you then expect your dividend growth rate to begin going down—to 5 percent the following year, 2 percent the next year, and to -2 percent per year thereafter. Based upon these estimates, what is the value of a share of your company’s stock? Assume that the required rate of return is 14 percent.
You own shares of Old World DVD Company and are interested in selling them. With so many people downloading music these days, sales, profits, and dividends at Old World have been declining 9 percent per year. The firm just paid a dividend of $1.10 per share. The required rate of return for a stock this risky is 13 percent. If dividends are expected to decline at 9 percent per year, what is a share of the stock worth today?
The required rate of return is 21.90 percent. Ninex Corp. has just paid a dividend of $3.12 and is expected to increase its dividend at a constant rate of 8.75 percent. What is the expected price of the stock three years from now?
Each quarter, Sirkota, Inc., pays a dividend on its perpetual preferred stock. Today the stock is selling at $63.19. If the required rate of return for such stocks is 18.0 percent, what is the quarterly dividend paid by this Sirkota?
The First Bank of Flagstaff has issued perpetual preferred stock with a $100 par value. The bank pays a quarterly dividend of $1.65 on this stock. What is the current price of this preferred stock given a required rate of return of 13.75 percent?
Proxicam, Inc., is expected to grow at a constant rate of 7.75 percent. If the company’s next dividend, which will be paid in a year, is $1.15 and its current stock price is $22.35, what is the required rate of return on this stock?
Moriband Corp. paid a dividend of $2.35 yesterday. The company’s dividend is expected to grow at a steady rate of 5 percent for the foreseeable future. If investors in stocks of companies like Moriband require a rate of return of 14.5 percent, what should be the market price of Moriband stock?