Investment Problems

1.Xytex Products just paid a dividend of $1.92 per share, and the stock currently sells for $38. If the discount rate is 15 percent, what is the dividend growth rate?

 

 

2.You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn has a reported equity beta of 1.6, a debt-to-equity ratio of .4, and a tax rate of 40 percent. Based on this information, what is Lauryn’s asset beta?

 

 

3.JJ Industries will pay a regular dividend of $.65 per share for each of the next four years. At the end of the four years, the company will also pay out a $71 per share liquidating dividend, and the company will cease operations. If the discount rate is 8 percent, what is the current value of the company’s stock?

 

4.Able, Baker, and Charlie are the only three stocks in an index. The stocks sell for $55, $312, and $92, respectively. If Able undergoes a 3-for-4 reverse stock split, what is the new divisor? 

 

Star Light & Power increases its dividend 2.3 percent per year every year. This utility is valued using a discount rate of 10 percent, and the stock currently sells for $46 per share. If you buy a share of stock today and hold on to it for at least three years, what do you expect the value of your dividend check to be three years from today?