accounting help

20170910142418stock_valuation.xlsx

Instructions

1. You have two problems - one on each tab of this Excel file.

2. Please show your work in the cells. Use Excel formulas instead of writing the values/answers directly in the cell.

The instructor will then know where you made a mistake and provide you valuable feedback and partial credit (if appropriate).

Total Points: 8

Company X is paying an annual dividend of $1.35 and has decided to pay the same amount forever. How much should you pay for the stock, if you want to earn an annual rate of return of 9.5% on this investment?
Dividend	$ 1.35
Rate of Return	0.095
	Answer:
Refer to the Solved Example 2 on Page 184 of your text.

You want to purchase common stock of Company X and hold it for 7 years. The company just announced that they will be paying an annual cash dividend of $6.00 per share for the next 9 years.
How much should you pay for the stock, if you will be able to sell the stock for $28 at the end of seven years and you want to earn an annual rate of return of 11% on this investment?
Future Price	$ 28.00
Dividend	$ 6.00
Rate of Return (r)	0.11
Number of years (n)	9
PRICE =	$ 28.00	x	0.434	+	$ 6.00	x	5.146
ANSWER =
Refer to the Solved Example 1 on Page 182 of your text.
	FORMULAS
	=B4		=(1/(1+B6)^(B7-1))		=B5		=(1-D11)/B6