FIN254

Assignment#6 (Based on Chapter 8)

1. Unilever has just paid a dividend of TK 4.00 on its stock. The growth rate in dividends is expected to be a constant 6 per !ear indefinitel!. "nvestors re#uire a 16 return on the stock for the first three !ears$ a 1% for the next three !ears$ and 10 return thereafter. &hat is the current share price' (. )*+, is a !oung startup co-pan!. .o dividends will be paid on the stock over the next / !ears because the fir- needs to support its growth with retained earnings. The co-pan! will pa! a 010 per share in 1th !ear and will increase the dividend b! / per !ear thereafter. "f the re#uired return on the stock is 12 $ what is the current share price' %. ,exi-co has just paid a dividend of Tk 1 per share and has announced that it will increase the dividend b! Tk 4 per share for each of the next four !ears and never pa! another dividend. "f !ou re#uire an 10 return on the co-pan!3s stock$ how -uch will !ou pa! for a share toda!' 4. +pex Tanner! is experiencing supernor-al growth. 4ividends are expected to grow at (( for the next three !ears$ with the growth rate falling off to a constant 6 thereafter. "f the re#uired returns are 12 and the co-pan! has just paid a TK 4.10 dividend$ what is the current share price' 2. +pex 5pinning "nc. share currentl! sells for Tk 2%.20 per share. The -arket re#uires a 12 return on the fir-3s stock. "f the co-pan! -aintains a / growth rate in dividends$ what was the -ost recent dividend per share paid on the stock' 6. ,+T+ has just issued so-e new preferred stock. The issue will pa! a Tk 12 annual dividend in perpetuit!$ beginning 1( !ears fro- now. "f the -arket re#uires a 1 return on this invest-ent$ how -uch does a share of prefer stock cost toda!' /. 6ra-eenphone is experiencing rapid growth. The co-pan! expects that its dividend will grow at (2 for the next ten !ears and then at / for perpetuit!. The re#uired return on the co-pan!3s stock is 12 . "f the dividend per share just paid was Tk 1.00$ what is the stock price'

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