Question

Question 12 (0.2 points) Donuts Delite just paid an annual dividend of $1.10 a share. The firm expects to increase this dividend by 8 percent per year the following three years and then decrease the dividend growth to 2 percent annually thereafter. Which one of the following is the correct computation of the dividend for year 5? O 1) ($1.10) (1.08)3 (1.02)3 O2) ($1.10) (1.08 x 3) (1.02 * 3) O 3) ($1.10) (1.08 * 3) (1.02 x 4) O4) ($1.10) (1.08)3 (1.02)2 5) ($1.10) (1.08)3 (1.02)4 Question 13 (0.2 points) An investor purchased a stock for $29.55 and sold it one year later for $40.78. What was the investors capital gain rate? (Enter your answer as a decimal rounded to 4 decimal places, not a percentage). For example, enter .0153 instead of 1.53%. Your Answer: Answer View hint for Question 13 Question 14 (0.2 points) An investor purchased a stock for $40.13 and sold it one year later for $47.48. The investor also received a dividend payment of $0.14. What was the investor's realized capital gain rate? (Enter your answer as a decimal rounded to 4 decimal places, not a percentage. For example, enter .0153 instead of 1.53%.) Your Answer: Answer View hint for Question 14 Question 15 (0.2 points) A share of common stock just paid an annual dividend of $3.65. If the expected long-run annual dividend growth rate for this stock is 1% and investors require a 8% rate of return, what is the most an investor should pay for this stock today? Your Answer: Answer

Answer 1

Question 12: Dividend for year 5, D5

D5 = D0 * (1 + g1)^3 * (1 + g2)^(5 - 3)

D0 = 1.10

g1 = 8%

g2 = 2%

D5 = 1.10 * (1 + 0.08)^3 * (1 + 0.02)^2

D5 = 1.10 *1.08^3 * 1.02^2 (Option 4 is correct)

Please do not downvote for not answering the remaining questions. As per HOMEWORKLIB RULES, when there are multiple questions, we are encouraged to provide a solution to at least the first question.

Can you please upvote? Thank You :-)