1. Dapper Wrapper Coat Corporation is currently expected to grow by 15% for each of
the next three years due to their superior cable television system. However
thereafter growth is expected to level o! to 8% annually. DWC just paid a dividend of
$.75. Investors in the system have a required rate of return of 12%. What is the
value of DWC stock?
2.The Blizzard Wizard Snow Plows Corporation has been experiencing some tough times
lately. They predict that their growth rate will decline 10% for the next two years
then decline further by 5% in the following two years. After that the owners are
encouraged that their new product line will enhance the bottom line and growth will
expand to 16% for two years and then level o! to 5% for the foreseeable future.
Investors have a required rate of return of 15% and the last dividend paid was $1.15.
What would an investor be willing to pay for BWSP Corp. stock?
3.Frocks & Socks Clothiers has fallen on hard times. Its management expects to pay no
dividends for the next two years. However in the third year expected dividends will
be $1.35 and it is expected to grow at a rate of 4% in the 4
year 8% in the 5
and 12% in the 6
year and thereafter. If the required return for Frocks Corporation is
20% what would be the price of the stock today?
4.Free Press Magazine Inc. is experiencing a slump. Their dividends are expected to
decline at a rate of 10% for three years. After that with the new terminal FP expects
dividends to increase at a constant rate of 8% for the foreseeable future. FP just paid
a dividend of $1.75. Investors in FP have a required return of 12%. What would an
investor be willing to pay for FP stock?
5.Listed below are the dividends paid for Waterproof Roof Manufacturing Stock.
Although the company had a bad stretch of earnings several years ago management
believes that they are on a course that will maintain their current rate of growth.
Investors require a 18% return on this companys stock. Waterproof stock sells for
$42.75 per share. Would you pay $42.75 for the stock and if not what would be a fair
price for Waterproof?
6.What would be a fair price for Gold Mind Memory Techniques Inc. if the dividends
earned are as listed below? Gold Mind stock has a rate of return of 14%.
2014 $ 1.90
7.How much should a share of Up and Coming Preferred stock sell for if it currently has
a dividend of $115 and it provides a return of 12%?
Answers:$8.88$24.26$10.55 $28.01$11.19 No