Session:11 Stocks and Stock Valuation
Problems
Principles of Finance | Leadership Development – Micro-Learning Session
Rice University 2020 | Michael Laverty, Colorado State University Global Chris Littel, North Carolina State University| https://openstax.org/details/books/principles-finance
1 . Today, Sysco Enterprises paid dividends on its common stock of $1.25 per share. If dividends per share are expected to increase to $3.50 per share six years from now, what is the percentage dividend growth rate?
2 . Let’s say you want to purchase shares of Fontaine Ltd. and then hold this stock for six years. The company has a stated dividend policy of $2.00 annually per share for the next six years, at the end of which time you will sell the stock. You expect to be able to sell the stock for $35.00 at that time. If you want to earn an 8% return on this investment, what price should you pay today for this stock?
3 . Damian Painting Systems has established a dividend policy of $3.00 per share per year. If the company plans to be in business forever, what is the value of this stock if an investor wants a 10% return?
4 . Wilk Productions wants its shareholders to earn a 12% return on their investment in the company. At what value would Wilk stock be priced if the company paid $2.75 per share in constant annual dividends forever?
5 . Dax Industrial Systems has stock currently priced at $50.00 per share. If investors are earning a 7% return on Dax Industrial, what is the company’s annual dividend payment per share?
6 . If a stock is selling at $400 with a current dividend of $40 and a potential investor’s required rate of return is 15%, what would be the anticipated dividend growth rate?
7 . Mind Max Inc. has a dividend policy that increases annual dividends by 3% each year. If last year’s dividend was $2.00, the company intends to stay in business for 50 years, and an investor wants a 9% return, what would be the price of Mind Max stock?
8 . Odon Corp. paid dividends today in the amount of $1.50 per share. If Odon will pay dividends of $5.00 10 years from today, what is the annual dividend growth rate over this 10-year period?
9 . The Kirkson Distributors common stock is currently selling at $52.00 per share, pays dividends annually at $2.50 per share, and has an annual dividend growth rate of 2%. What is the required return?
10 . If a preferred share of stock pays dividends of $2.50 per year and the required rate of return for the stock is 6%, what is its intrinsic value?