Question

Metlock Mechanical Inc.’s first dividend of $3.3 per share is expected to be paid six years from today. From then on, dividends will grow by 10 percent per year for five years. After five years, the growth rate will then slow to 5 percent per year in perpetuity. Assume that Metlock’s required rate of return is 15 percent. What is the price of a share of Metlock Mechanical today? (Round present value factor calculations to 5 decimal places, e.g. 1.15612. Round other intermediate calculations to 3 decimal places, e.g. 1.156 and final answer to 2 decimal places, e.g.115.61.)

Price of the stock is ??

WileyPLUS Problem 7-3

Sunland Corporation’s common shares are trading at $12 per share and paid a dividend (D_o) of $1.75 per share last year. The growth rate is expected to increase from 4% to 6%. Calculate Sunland’s required return on common shares. (Round final answer to 2 decimal places, e.g. 15.75.)

Required return on common shares

%

Answer 1

Now , next question Di 2-9 where, &= EPP g - required growth relun rale Hence, 12 = 1.758 1.06 -0.06 return = 0.2146 21:46 % required or