QUIZ 4

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School

Central Michigan University *

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Course

670

Subject

Finance

Date

Jan 9, 2024

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docx

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Uploaded by CoachHornet2666

QUIZ 4 The common stock of Andy’s Sporting Goods sells for $30.65 a share. The company recently paid their annual dividend of $1.85 per share and expects to increase this dividend by 2 percent annually. What is the rate of return on this stock? 8.16 PERCENT Battles, Inc. just paid an annual dividend of $1.20 a share. The dividend will increase by 3 percent for the next three years and then increase by 2 percent annually thereafter. What is the present value of this stock at a discount rate of 9 percent? $17.97 You would like to earn a 9.5 percent rate of return on a preferred stock paying $9 dividend per share. How much are you willing to pay for 10 shares? $947.37 The ________ yield is the rate at which a stock’s price is expected to appreciate or depreciate. CAPITAL GAINS Baker’s Delight just paid an annual dividend of $1.60 a share. The dividend will increase by 4 percent for the next four years and then increase by 3 percent annually thereafter. What is the present value of this stock at a discount rate of 14 percent? $15.49 The common stock of the Paper Co. is selling for $41.40 a share and offers an 8.2 percent rate of return. The dividend growth rate is constant at 4 percent. What is the expected amount of the next dividend? $1.74 The Black & Gold Co. is expected to pay a $3.60 annual dividend. The market rate of return on this security is 14 percent and the market price is $38.70 a share. What is the expected growth rate of Black & Gold? 4.70 percent Bottle Top, Inc. recently announced they will pay their first annual dividend next year in the amount of $0.75 a share. The dividend will be increased by 4 percent annually thereafter. How much are you willing to pay for one share of this stock if you require a 10 percent rate of return? $12.50 The common stock of Andy’s Sporting Goods sells for $25.40 a share. The company recently paid their annual dividend of $1.30 per share and expects to increase this dividend by 3 percent annually. What is the rate of return on this stock? 8.27 percent Hardware, Inc. recently announced their annual dividend will increase to $3.15 a share for next year with annual increases in the dividend amount of 1.15 percent thereafter. You require a 13.5 percent rate of return on this relatively risky security. How much are you willing to pay for one share of this stock? $25.51 The Black & Gold Co. is expected to pay a $2.50 annual dividend next year. The market rate of return on this security is 12 percent and the market price is $31.40 a share. What is the expected growth rate of Black & Gold? 4.04 Percent

ThBell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 20% a year for the next four years and then decreasing the growth rate to 5% per year. The company just paid its annual dividend in the amount of $1.00 per share. What is the current value of one share if the required rate of return is 9.25%? $41.05

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