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Learning Goal: I’m working on a finance discussion question and need a sample draft to help me learn.

Problem 11-14 – Perpetuity Model

Suppose that a security paid a dividend of \$2.1 per share for the year. The dividend is expected to grow by \$0.05 per year for 5 years. Afterwards, the dividend will grow at a constant 4% forever. Its required rate is 6%. What is the expected price in five years?

Problem 11-16 – Dividend Discount Model

In three years, a company is expected to pay its first dividend of \$1.79 per share per year. At that point, the dividend is expected to grow at 5% per year indefinitely. Also suppose the required rate of return is 8%. What is the value of the stock?

Problem 11-17 – Dividend Discount Model

Suppose that a company will pay a \$0.85 per-share-per-year dividend next year. It is expected to increase that dividend by \$0.05 each year for three years (to year four). In year four, the PE ratio of the firm is expected to be 21. Earnings were \$2.15 per share last year and are expected to grow at 8% each year to year four. Suppose that the required rate of return is 9%. What is the value of the stock?

blem 11-18 – Dividend Discount Model

A company paid a \$1.65 per-share-per-year dividend last year. It is expected to increase at an annual 9% growth rate to year five. After year five, the dividend will grow at 7% per year indefinitely. Suppose that the required rate of return is 10%. What is the value of the stock?