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Share Price, Dividend Discount Model, Cost of Buying, Preferred Stock

- On March 14, 2013, the Dow Jones Industrial Average set a new high. The index closed at 14,539.14, which was up 83.86 points from the previous day's close of 14.455.28. What was the return (in percent to four decimal places) of the stock market for March 14, 2013?

- At your brokerage firm, it costs $9.50 per stock trade. How much money do you need to buy 300 shares of Time Warner, Inc. (TWX), which trades at $22.62?

- Financial analysts forecast Safeco Corporation (SAF) growth for the future to be a constant 10 percent. Safeco's recent dividend was $1.20. What is the value of Safeco stock when the required return is 12 percent?

- A preferred stock from Duquesne Light Company (DQUPRA) pays $2.10 in annual dividends. If the required return on the preferred stock is 5.4 percent, what is the value of the stock?

-Ultra Petroleum (UPL) has earnings per share of $1.56 and a P/E ratio of 32.48. What is the stock price?

Solution Preview

1. Dow Jones

Return = 83.86/14,455.28 = 0.5801%

2. Brokerage firm - Total price will total share value + cost of trade.

Total Price = ...

Solution Summary

The solution provides varied examples where return on change in Dow Jones is computed, share price using dividend discount model, value of preferred stock with given dividend, and required return and total price of buying a stock.

$2.19