Question

You are currently thinking about investing in a stock valued at $24 per share. The stock recently paid a dividend of $2.20 and its dividend is expected to grow at a rate of 4 percent for the foreseeable future. You normally require a return of 12 percent on stocks of similar risk. Is the stock overpriced, underpriced, or correctly priced? (Round answer to 2 decimal places, e.g. 52.75.)

Current value of stock

$

The stock is underpriced, correctly priced, overpriced at $24?

Crane, Inc., paid a dividend of $3.52 last year. The company's management does not expect to increase its dividend in the foreseeable future. If the required rate of return is 16.0 percent, what is the current value of the stock? (Round answer to 2 decimal places, e.g. 15.25.)

CURRENT VALUE: ________

Wildhorse Corp. paid a dividend of $2.72 yesterday. The company’s dividend is expected to grow at a steady rate of 5 percent for the foreseeable future. If investors in stocks of companies like Wildhorse require a rate of return of 20 percent, what should be the market price of Wildhorse stock? (Round dividend to 3 decimal places, e.g. 3.756 and round final answer to 2 decimal places, e.g. 15.25.)

Market price? _________

The First Bank of Flagstaff has issued perpetual preferred stock with a $100 par value. The bank pays a quarterly dividend of $1.70 on this stock. What is the current price of this preferred stock given a required rate of return of 12.5 percent? (Round answer to 2 decimal places, e.g. 15.25.)

Current Price? _________

Each quarter, Sheridan, Inc., pays a dividend on its perpetual preferred stock. Today the stock is selling at $65.50. If the required rate of return for such stocks is 16.00 percent, what is the quarterly dividend paid by this Sheridan? (Round answer to 2 decimal places, e.g. 15.25.)

Quarterly dividend paid _____________

Answer 1