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    Assignment 2 - Stock Valuation

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    Mary Yvonne Ares
    This document provides instructions for an assignment on stock valuation using constant and non-constant growth models. It lists 8 practice problems to solve involving calculating stock prices given information about current dividends, expected dividend growth rates, and required rates of return. Students are asked to show their work and submit their solutions by the due date of July 3, 2020.

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    Assignment 2 - Stock Valuation

    Uploaded by

    Mary Yvonne Ares
    156 views1 page
    This document provides instructions for an assignment on stock valuation using constant and non-constant growth models. It lists 8 practice problems to solve involving calculating stock prices given information about current dividends, expected dividend growth rates, and required rates of return. Students are asked to show their work and submit their solutions by the due date of July 3, 2020.

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    This document provides instructions for an assignment on stock valuation using constant and non-constant growth models. It lists 8 practice problems to solve involving calculating stock prices given information about current dividends, expected dividend growth rates, and required rates of return. Students are asked to show their work and submit their solutions by the due date of July 3, 2020.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    156 views1 page

    Assignment 2 - Stock Valuation

    Uploaded by

    Mary Yvonne Ares
    This document provides instructions for an assignment on stock valuation using constant and non-constant growth models. It lists 8 practice problems to solve involving calculating stock prices given information about current dividends, expected dividend growth rates, and required rates of return. Students are asked to show their work and submit their solutions by the due date of July 3, 2020.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 1

    ASSIGNEMENT #2

    STOCK VALUATION: Constant Growth and Non-constant Growth

    Instructions: Answer each of the problems, show your solutions. Three ways to submit:
    1. Solve on a piece of paper, take a photo of it and then upload on the LMS (Write your
    name on each page)
    2. Encode answers and solutions on Microsoft word then upload to the LMS.
    3. Encode your answers and solutions on the LMS directly.
    Due date: July 3, 2020

    1. Womack Toy Company’s stock is currently trading at Php25 per share. The
    stock’s dividend is projected to increase at a constant rate of 7 percent per year.
    The required rate of return on the stock, ks, is 10 percent. What is the expected
    price of the stock 4 years from today?

    2. Waters Corporation has a stock price of Php20 a share. The stock’s year-end
    dividend is expected to be Php2 a share (D1 = Php2.00). The stock’s required rate
    of return is 15 percent and the stock’s dividend is expected to grow at the same
    constant rate forever. What is the expected price of the stock seven years
    from now?

    3. McKenna Motors is expected to pay a Php1.00 per-share dividend at the end of


    the year (D1 = Php1.00). The stock sells for Php20 per share and its required rate
    of return is 11 percent. The dividend is expected to grow at a constant rate, g,
    forever. What is the growth rate, g, for this stock?

    4. A share of common stock has just paid a dividend of Php2.00. If the expected
    long-run growth rate for this stock is 15 percent, and if investors require a 19
    percent rate of return, what is the price of the stock?

    5. Your company paid a dividend of Php2.00 last year. The growth rate is expected
    to be 4 percent for 1 year, 5 percent the next year, then 6 percent for the following
    year, and then the growth rate is expected to be a constant 7 percent thereafter.
    The required rate of return on equity (ks) is 10 percent. What is the current stock
    price?

    6. Mack Industries just paid a dividend of Php1.00 per share (D0 = Php1.00). Analysts
    expect the company’s dividend to grow 20 percent this year (D1 = Php1.20) and
    15 percent next year. After two years the dividend is expected to grow at a
    constant rate of 5 percent. The required rate of return on the company’s stock is
    12 percent. What should be the company’s current stock price?

    7. Hadlock Healthcare expects to pay a Php3.00 dividend at the end of the year (D1
    = Php3.00). The stock’s dividend is expected to grow at a rate of 10 percent a
    year until three years from now (t = 3). After this time, the stock’s dividend is
    expected to grow at a constant rate of 5 percent a year. The stock’s required rate
    of return is 11 percent. What is the price of the stock today?

    8. An analyst estimates that Cheyenne Co. will pay the following dividends: D1 =
    Php3.0000, D2 = Php3.7500, and D3 = Php4.3125. The analyst also estimates
    that the required rate of return on Cheyenne’s stock is 12.2 percent. After the third
    dividend, the dividend is expected to grow by 8 percent per year forever. What is
    the price of the stock today?

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