Constant-Growth Dividends, economics homework help

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wbarmabah

Economics

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Hello,Please assist with the below and complete in the attached xls. Thanks!

1.  Constant-Growth Dividends: Problems 1, 2, 3, 4, and 6 on page 265

2.  Zero-Growth Dividends: Problem 7 on page 265 (an annuity) and Problem 8 on page 266 (a perpetuity)

3.  Two-Stage Dividend Growth: Problem 25 on page 267

1.  Stock Values [LO1] The Jackson–Timberlake Wardrobe Co. just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. If investors require a return of 10.5 percent on The Jackson–Timberlake Wardrobe Co. stock, what is the current price? What will the price be in three years? In 15 years?

2.  Stock Values [LO1] The next dividend payment by Halestorm, Inc., will be $2.04 per share. The dividends are anticipated to maintain a growth rate of 4.5 percent forever. If the stock currently sells for $37 per share, what is the required return?

3.  Stock Values [LO1] For the company in the previous problem, what is the dividend yield? What is the expected capital gains yield?

4.  Stock Values LO1> Caan Corporation will pay a $3.56 per share dividend next year. The company pledges to increase its dividend by 3.75 percent per year indefinitely. If you require a return of 11 percent on your investment, how much will you pay for the company’s stock today?

6.Stock Valuation LO1> Suppose you know that a company’s stock currently sells for $63 per share and the required return on the stock is 10.5 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it’s the company’s policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?

7.Stock Valuation [LO1] Estes Park Corp. pays a constant $7.80 dividend on its stock. The company will maintain this dividend for the next 13 years and will then cease paying dividends forever. If the required return on this stock is 11.2 percent, what is the current share price?

8.Valuing Preferred Stock [LO1] Moraine, Inc., has an issue of preferred stock outstanding that pays a $3.50 dividend every year in perpetuity. If this issue currently sells for $85 per share, what is the required return?

25.Two-Stage Dividend Growth Model [LO1] Navel County Choppers, Inc., is experiencing rapid growth. The company expects dividends to grow at 16 percent per year for the next 11 years before leveling off at 4 percent into perpetuity. The required return on the company’s stock is 10 percent. If the dividend per share just paid was $1.94, what is the stock price?


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Chapter 8 Problems 4, 6, 7, 32 Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green NOTE: Some functions used in these spreadsheets may require that the "Analysis ToolPak" or "Solver Add-In" be installed in Excel. To install these, click on the Office button then "Excel Options," "Add-Ins" and select "Go." Check "Analyis ToolPak" and "Solver Add-In," then click "OK." Chapter 8 Question 4 Input area: Dividend paid Dividend growth rate Required return Output area: Price #DIV/0! Chapter 8 Question 6 Input area: Stock price Required return Output area: Next year's dividend $ - Current dividend $ - Chapter 8 Question 7 Input area: Current dividend Years until dividend ceases Required return Output area: Share price $ - Chapter 8 Question 32 Input area: Required return Most recent dividend Stock W dividend growth rate Stock X dividend growth rate Stock Y dividend growth rate Stock Z: Initial growth rate Initial # of years Final growth rate Output area: Dividend yields: Stock W price Dividend yield Capital gains yield #DIV/0! #DIV/0! #DIV/0! Stock X price Dividend yield Capital gains yield #DIV/0! #DIV/0! #DIV/0! Stock Y price Dividend yield Capital gains yield #DIV/0! #DIV/0! #DIV/0! Stock Z price at final rate Stock Z current price Dividend yield Capital gains yield #DIV/0! #DIV/0! #DIV/0! #DIV/0! In all cases, the required return is 0%, but this return is distributed differently between current income and capital gains. High growth stocks have an appreciable capital gains component but a relatively small current income yield; conversely, mature, negativegrowth stocks provide a high current income but also price depreciation over time.
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Explanation & Answer

Hi again,Attached is the solution set with all formulae completely spelled out, numbers filled in, and explanations provided :)Thanks again!Selenica

D0
Growth rate (g)
Required rate ('r)
𝑃0 =

$

𝐷0 (1 + 𝑔)
𝑟−𝑔

𝑃3 = 𝑃0 ∗ 1 + 𝑔
𝑃15 = 𝑃0 ∗ 1 + 𝑔

1.95
4%
10.5%
$ 31.20

3

15

$ 35.10
...


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