Principles of Finance Homework Chapter 07

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1)

Nofal Corporation will pay a $4.65 per share dividend next year. The company pledges to increase its dividend by 7 percent per year, indefinitely.

 

Required:

If you require a return of 11 percent on your investment, how much will you pay for the company’s stock today? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

 

 

2)

 

Rabie, Inc., has an issue of preferred stock outstanding that pays a $5.60 dividend every year, in perpetuity.

 

Required:

If this issue currently sells for $80.40 per share, what is the required return? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

 

 

3)

 

The Sleeping Flower Co. has earnings of $1.66 per share.

 

Requirement 1:

If the benchmark PE for the company is 23, how much will you pay for the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

 

  Current stock price$ [removed]  

 

Requirement 2:

If the benchmark PE for the company is 26, how much will you pay for the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

 

  Current stock price$ [removed]  

 

 

 

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