FIN3013 Lab #6. UTSA College of Business FIN3013Lab Questions? From Assignment #5.

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Presentation transcript:

FIN3013 Lab #6

UTSA College of Business FIN3013Lab Questions? From Assignment #5

UTSA College of Business FIN3013Lab Constant Dividend Valuation Model Sky Blue Corporation has just paid a $1.20 dividend per share on common stock. The company has a policy of increasing its dividends at a rate of 3% a year. If you require a 14% rate of return, what is the maximum price you would be willing to pay for a share of this stock?

UTSA College of Business FIN3013Lab Preferred Stock Green Glass Enterprises has preferred stock which pays a dividend of $3.00 per share in perpetuity. If you require an 11.5% rate of return, what is the maximum price you would be willing to pay for a share of Green Glass’s preferred stock?

UTSA College of Business FIN3013Lab Supernormal Growth Pam’s Pies has just issued a dividend of $1.00 a share on its common stock. Because the company is going through a huge growth spurt, the company plans on increasing dividends at a rate of 20% a year over the next three years. After that, the company expects dividend growth will slow to 4% a year. If you require a 14% rate of return, what is the maximum price you would be willing to pay for a share of Pam’s Pies stock?

UTSA College of Business FIN3013Lab Solving for Required Rate of Return Crockett Enterprises just paid a dividend of $2.50 a share. The company has a policy of increasing its dividend at a rate of 2% every year. If investors are paying $15.75 a share for this stock, what is their require rate of return?

UTSA College of Business FIN3013Lab Remember Assignment #6 is due next lab Quiz #3 next lab will cover stock valuation problems

UTSA College of Business FIN3013Lab Quiz #2