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  3. 1. gerdin inc. just paid out its annual dividend o

1. Gerdin Inc. just paid out its annual dividend of $2/share. The dividend is expected...

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Finance

1. Gerdin Inc. just paid out its annual dividend of $2/share. The dividend is expected to grow at 50% a year for the next 2 years. Afterwards, the annual growth rate will be settled at 5% indefinitely. The required rate of return of the stock is 15%. Find out the stock price today.

2. The dividend of Company A has been increasing at 2% a year for many years, and it is expected to continue to increase at this rate in the future. This year's dividend is $1/share, and was distributed yesterday. The company has one million shares outstanding. Suppose the manager of the company just identifies a promising project. To invest in the project, the company will reduce next year's dividend by $0.20 a share. In return, annual dividend will increase by $0.05 a share starting the year after. The required rate of return of the company's stock is 8% per year.

a. What is the NPV of the project?

b. What is the stock price today if the company decides to take the project?

3. ISU Inc. has issued some preferred stocks with stated value of $100/share and 10% dividend rate. The required rate of return for the preferred stock is 12%. How much you are willing to pay for the preferred stock?

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