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Questions-Stock Valuations

Calculate current stock prices and future prices based on dividend growth rates and investor required returns.

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Questions-Stock Valuations

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  1. Questions-Stock Valuations

  2. Q1) • The Starr Co. just paid a dividend of $1.80 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year, indefinitely. Investors require a return of 11 percent on the stock. • What is the current price? • What will the price be in three years? • What will the price be in 16 years?

  3. Q2 • The next dividend payment by ECY, Inc., will be $2.16 per share. The dividends are anticipated to maintain a growth rate of 5 percent, forever. The stock currently sells for $44 per share. • What is the required return?

  4. Q3) • The next dividend payment by ECY, Inc., will be $2.16 per share. The dividends are anticipated to maintain a growth rate of 5 percent, forever. The stock currently sells for $44 per share. • What is the dividend yield? • What is the expected capital gains yield?

  5. Q4) • Schiller Corporation will pay a $3.26 per share dividend next year. The company pledges to increase its dividend by 6.5 percent per year, indefinitely. If you require a return of 15 percent on your investment, how much will you pay for the company’s stock today?

  6. Q5) • Gruber Corp. pays a constant $8.30 dividend on its stock. The company will maintain this dividend for the next 14 years and will then cease paying dividends forever. The required return on this stock is 12 percent • What is the current share price? 

  7. Q6) • The Spring Flower Co. has earnings of $1.85 per share. The benchmark PE for the company is 15 • What stock price would you consider appropriate? • What if the benchmark PE were 18?

  8. Q7) • Universal Laser, Inc., just paid a dividend of $3.35 on its stock. The growth rate in dividends is expected to be a constant 4 percent per year, indefinitely. Investors require a return of 16 percent on the stock for the first three years, a rate of return of 14 percent for the next three years, and then a return of 12 percent thereafter. • What is the current share price for the stock?

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