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problem1. Star Solutions, Inc. paid a dividend preceding year of $3.55, which is anticipated to grow at a stable rate of 3%. Star Solutions has beta of 1.8 and their stock is currently selling for $31.47. When the market interest rate is 9% and the risk-free rate is 4%, would you buy Star Solutions' stock?

problem2. Previous year, you bought a stock at the price of $51.50 a share. Over the course of the year, you got $1.80 per share in dividends and the annual inflation rate averaged 2.6 percent. Today, you sold your shares for $53.60 a share. What is your estimated annual real rate of return on this investment?

problem3. X Inc. paid an annual dividend of $1.18 a share last month. The company is planning on paying $1.50, $1.75, and $1.80 a share over the next 3 years, respectively. After that, the dividend will be constant at $1.50 per share per year. What is the market price of this stock if the required rate of return is 10.5 percent?

problem4. You are considering the purchase of the investment which would pay you $5,000 per year for Years 1-5, $3,000 per year for Years 6-8, and $2,000 per years for Years 9-10. When you require a 10 percent rate of return and the cash flows occur at the end of each year, then how much should you be willing to pay for this investment?

problem5. X, a stable growth Company has a current stock price of $25. X's next annual dividend per share is forecasted to be $2.00. X has a beta coefficient of 0.6, the risk-free rate is 6 percent, and the anticipated market risk premium is 9 percent. When you purchase the stock for its current market price, what is your expected capital gain yield?

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M93955

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