Advanced Financial Management Assignment -

1. A company listed on the New York Stock Exchange is expected to pay a dividend of $10 in one year and $11 in two years. You expect to sell the stock after two years for an estimated price of $120. The required rate of return is 12%. How much are you willing to pay for this stock?

2. GE is issuing a preferred stock that has a face value of $100. The stock pays a fixed annual dividend of $5 per share. Suppose the required rate of return on the stock is 10%. How much are you willing to pay for the stock?

3. A stock you are interested in has just paid a dividend of $1. The anticipated annual growth rate in dividends is 10% forever. Your required rate of return is 12%. Calculate the expected price of the stock.

4. Windover Machines, Inc., just announced that they will pay an annual dividend of $2.50 a share at the end of each of the next 2 years. At the end of year 3, the company expects to pay a $35 a share liquidating dividend. After that, the company will cease operations. The discount rate (required rate of return) on this stock is 14 percent. What is the current stock price per share?

5. ABC company is not currently paying cash dividends, but is expected to initiate its first ever dividend of $20 per share three years from today. The dividend is then expected to grow at 10% forever thereafter. If your required rate of return is 15%, how much are you willing to pay for the stock?