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# Financial Analysis on Value of Stocks

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1. Stock. What is the value of a stock with a
a. \$2 dividend just paid and an 8% required return with 0% growth?

b. \$3 dividend just paid and a 9% required return with 1% growth?

c. \$4 dividend to be paid and a 10% required return with 2% growth?

d. \$5 dividend to be paid and a 11% required return with 3% growth?

2. Stock. What is the required rate of return on a stock with a
a. \$1.5 expected dividend and a \$19 price with 7% growth?

b. \$1.75 expected dividend and a \$25 price with 8% growth?

c. \$2 expected dividend and a \$26 price with 9% growth?

d. \$2.25 expected dividend and a \$33 price with 10% growth?

3. Stock. What is the growth rate of the stock with a
a. \$2.50 expected dividend and a \$30.60 price with 15% required return?

b. \$2 expected dividend and a \$25.35 price with 12% required return?

c. \$3 expected dividend and a \$10.40 price with 11% required return?

d. \$1.77 expected dividend and a \$50.20 price with 14% required return?

4. Stock price. What is the value of a stock with high growth then constant growth,
a. dividends of \$1.50, \$3.00, and \$6.00, constant growth at 4% and a required return of 6%?
b. dividends of \$2.50, \$3.50, and \$5.00, constant growth at 3.5% and a required return of 8%?
c. dividends of \$1.50, \$3.00, and \$6.00, constant growth at 5% and a required return of 10%?
d. dividends of \$2.50, \$3.50, and \$5.00, constant growth at 7% and a required return of 12%?

#### Solution Preview

1. the discounted dividend model states price = D/(r-g) where d is dividend, r is required return and g is growth rate.
The calculation is very simply, I will show you a step by step solution for the first one and then work out the numbers for the rest.

a) p = 2/(0.08-0.00) = 25
b) p = 37.5
c) p = 50
d) p = 62.5

2. we rearrange price = D/(r-g) => ...

\$2.19