Introduction to finance

Answer questions A-I

Question A

A share of preferred stock with an annual dividend of $10 has an expected return of 3% annually. What is the current estimated price of the preferred stock?

Question B

You forecast a company's dividends for the next four years. In Year 1, you expect to receive $1.00 in dividends. In Year 2, you expect to receive $1.10 in dividends. In Year 3, you expect to receive $1.20 in dividends. In Year 4, you expect to receive $1.30. After Year 4, dividends are expected to grow at 2%. The rate of return for similar risk common stock is 7%. What is the current value of this company's stock?

Question C

What is the dividend yield for the company in Question 2?

Question D

The current value of Wampa Inc. stock is $50. Dividends are expected to grow at 5% indefinitely and the most recent dividend was $5. What is the required rate of return on Wampa Inc. stock? (Hint the word "Was" is used.)

Question E

Hoth, Inc. will pay a dividend of $5 next year. Dividends are expected to grow at 5% after next year's dividend. The required rate of return for similar stocks is 10%. What is the current value of Hoth, Inc. stock?

Question F

Alphabet Inc. will not pay it's first dividend until ten years from now. The first dividend received in 10 years (Year 10) is expected to be $120. Dividends are expected to grow at 4% forever after this first dividend payment. The required rate of return for similar stocks is 15%. What is the current value of Alphabet, Inc. stock?

Question G

Snoke Inc's will pay a dividend of $10 next year. The required rate of return is 10% and dividends are expected to grow 5% after next year. What will Snoke's dividend be in 100 years? (Year 100)?

Question H

Snoke Inc's will pay a dividend of $10 next year. The required rate of return is 10% and dividends are expected to grow 5% after next year. What is Snoke's estimated stock price at the end of Year 99? (Hint use Year 100 dividend)

Question I

Snoke Inc's will pay a dividend of $10 next year. The required rate of return is 10% and dividends are expected to grow 5% after next year. What is Snoke's estimated stock price as of today (Year 0 Estimated Price of Stock)?