Question

Proxicam, Inc., is expected to grow at a constant rate of 7.75 percent. If the company’s next dividend, which will be paid in a year, is $1.25 and its current stock price is $22.35, what is the required rate of return on this stock? (Round intermediate calculations to 4 decimal places, e.g. 1.5325 and final answer to 2 decimal places, e.g. 17.50%.)

The First Bank of Ellicott City has issued perpetual preferred stock with a $100 par value. The bank pays a quarterly dividend of $1.65 on this stock. What is the current price of this preferred stock given a required rate of return of 11.00 percent? (Round answer to 2 decimal places, e.g. 15.25.)

The preferred stock of Axim Corp. is currently selling at $54.16. If the required rate of return is 13.9 percent, what is the dividend paid by this stock? (Round answer to 2 decimal places, e.g. 15.25.)

Each quarter, Sirkota, Inc., pays a dividend on its perpetual preferred stock. Today the stock is selling at $64.15. If the required rate of return for such stocks is 17.5 percent, what is the quarterly dividend paid by this firm? (Round answer to 2 decimal places, e.g. 15.25.)

The required rate of return is 23.60 percent. Ninex Corp. has just paid a dividend of $3.12 and is expected to increase its dividend at a constant rate of 6.95 percent. What is the expected price of the stock three years from now? (Round answer to 2 decimal places, e.g. 15.20.)

Jenny Banks is interested in buying the stock of Fervan, Inc., which is increasing its dividends at a constant rate of 6.15 percent. Last year the firm paid a dividend of $2.65. The required rate of return is 15.65 percent.

What should be the price of the stock in year 5? (Do not round intermediate calculations. Round answer to 2 decimal places, e.g. 15.20.)

Answer 1

1)

Required rate of return D1:P0+g Here, Net stock price (PO) Expected dividend (D1) Growth rate (g) $ $ 22.35 1.25 7.75% Required rate of return 13.34% 1.25-22.35+7.75%

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