1. Stock Valuation Problems

2. If you expect the dividend in one year to be $ 2.25 and you expect it to grow at a constant rate each year of 5%, what do you believe the stock is worth assuming your RoR on the stock is 15.5?

3. Mtech has lost a big contract, so its sales are falling. As a result, the company’s earnings and dividends are declining at a constant rate of 5% per year. If D 0 = $5 and ks = 15%, what is value of McCue Mining’s stock?

4. Mtech Corp. investors expect Mtech to begin paying dividends, with the first dividend of $2 coming 1 year from today and should grow at a constant rate of 8% per year. If the rate of return is 15%, what is the value of the stock today?

5. Mtech Corp. is expanding rapidly, and it currently needs to retain all of its earnings; hence, it does not pay any dividends. However, investors expect Mtech to begin paying dividends, with the first dividend of $2 coming 3 years from today. The company should grow at a constant rate of 8% per year. If the rate of return is 15%, what is the value of the stock today?

6. Mtech Corp. is expanding rapidly, and it currently needs to retain all of its earnings; hence, it does not pay any dividends. However, investors expect Mtech to begin paying dividends, with the first dividend of $2 in one year. The dividend should grow rapidly – at a rate of 50% per year – during years 2 and 3. After year 3, the company should grow at a constant rate of 8% per year. If the rate of return is 15%, what is the value of the stock today?

7. Mtech Corp. is expanding rapidly, and it currently needs to retain all of its earnings; hence, it does not pay any dividends. However, investors expect Mtech to begin paying dividends, with the first dividend of $2 coming 3 years from today. The dividend should grow rapidly – at a rate of 50% per year – during years 4 and 5. After year 5, the company should grow at a constant rate of 8% per year. If the rate of return is 15%, what is the value of the stock today?

8. You expect your company to pay the following dividend pattern for three years as follows: D1 = $1, D2 = $2, D3=$3. After three years the dividends are expected to grow at a constant rate of 6% per year. If the required rate of return demanded by investors is 15%, what is the current price of your companies stock? If your stock was selling on the market for $25.50 would this stock be in equilibrium?

9. Radtech is a high-tech. The company is three years old and has experienced spectacular growth since its inception. It is not expected for Radtech to pay dividends for the next 5 years. You believe they will start paying in year six with the first dividend being $25. After that you expect Radtech to pay a constant dividend of $6 per share the foreseeable future. If the appropriate discount rate is 12% and the current market price is $25, is the stock work the price on the market?