Your Perfect Assignment is Just a Click Away

We Write Custom Academic Papers

100% Original, Plagiarism Free, Customized to your instructions!


Alabama State University Ch 9 Dividend Growth Rate Finance Calculations

Alabama State University Ch 9 Dividend Growth Rate Finance Calculations

Question Description

2. See the following basic examples before doing the assignment. 

Ch 9 Examples_page1.pdf

Ch 9 Examples_page2.pdf

Ch 9 Examples_page3.pdf

Ch 9 Examples_page4.pdf

Assignment problems (You must show all your work to get a full credit)

a) A firm just paid a $1.5 dividend per share today. If the required rate of return is 12% and the dividend is expected to grow at a constant rate of 4%, what is the stock price today?

b) A firm is expected to pay $2 dividend per share next year and the dividend growth rate is 8%. Find the future dividends from year 2 to year 5, that is, D2, D3, D4, and D5. 

c) A firm is expected to pay $1,6 dividend per share next year. The dividend is expected to grow at a 30% for 2 years and thereafter, decline and stay at a constant rate of 5%. Find the stock price today.

d) A firm is expected to produce $50 million free cash flow next year. The WACC is 10% and the free cash flow is expected to grow at a constant rate of 3%. The firm has $20 million debt and $5 million preferred stock. If the number of common shares is 40 million, what is the stock (common share) price today?

e) A firm has perpetual preferred stock outstanding with a par value of $10. The preferred stock pays $2.8 annual dividend and its price today is $35. What is the required rate of return on the preferred stock?

f) A firm’s stock price today is $30. The next year’s dividend is expected to be $1.2 per share and the required rate of return on the stock is 9%. Find the dividend constant growth rate.

g) If a firm’s cash flows becomes more risky, then, the required rate of return on its stock is likely to increase because investors will required more risk premium for the firm. Now, assume that the firm’s stock valuation exactly follows the constant growth model: P0 = D1/(r – g)

When the firm’s dividend growth rate (g) increases, if the stock price decreases instead of increasing, how can you explain this in terms of the riskiness of the firm’s cash flows?

Order Solution Now

Our Service Charter

1. Professional & Expert Writers: Course Elite only hires the best. Our writers are specially selected and recruited, after which they undergo further training to perfect their skills for specialization purposes. Moreover, our writers are holders of masters and Ph.D. degrees. They have impressive academic records, besides being native English speakers.

2. Top Quality Papers: Our customers are always guaranteed papers that exceed their expectations. All our writers have +5 years of experience. This implies that all papers are written by individuals who are experts in their fields. In addition, the quality team reviews all the papers before sending them to the customers.

3. Plagiarism-Free Papers: All papers provided by Course Elite are written from scratch. Appropriate referencing and citation of key information are followed. Plagiarism checkers are used by the Quality assurance team and our editors just to double-check that there are no instances of plagiarism.

4. Timely Delivery: Time wasted is equivalent to a failed dedication and commitment. Course Elite is known for timely delivery of any pending customer orders. Customers are well informed of the progress of their papers to ensure they keep track of what the writer is providing before the final draft is sent for grading.

5. Affordable Prices: Our prices are fairly structured to fit all groups. Any customer willing to place their assignments with us can do so at very affordable prices. In addition, our customers enjoy regular discounts and bonuses.

6. 24/7 Customer Support: At Course Elite, we have put in place a team of experts who answer all customer inquiries promptly. The best part is the ever-availability of the team. Customers can make inquiries anytime.