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2.

The next dividend payment by Halestorm, Inc., will be $2.00 per share. The dividends are anticipated to maintain a growth rate of 6 percent forever. If the stock currently sells for $40 per share, what is the required return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Required return

%

3.

The next dividend payment by Halestorm, Inc., will be $1.68 per share. The dividends are anticipated to maintain a growth rate of 6 percent forever. The stock currently sells for $32 per share.

What is the dividend yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Dividend yield

%

What is the expected capital gains yield? (Enter your answer as a percent.)

Capital gains yield

%

4.

Caan Corporation will pay a $3.02 per share dividend next year. The company pledges to increase its dividend by 5.5 percent per year indefinitely. If you require a return of 10 percent on your investment, how much will you pay for the companys stock today? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

Stock price

$

5.

Tell Me Why Co. is expected to maintain a constant 3.4 percent growth rate in its dividends indefinitely. If the company has a dividend yield of 5.2 percent, what is the required return on the companys stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Required return

%

6.

Estes Park Corp. pays a constant $8.45 dividend on its stock. The company will maintain this dividend for the next 15 years and will then cease paying dividends forever. If the required return on this stock is 13 percent, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Current share price

$

7.

Moraine, Inc., has an issue of preferred stock outstanding that pays a $6.75 dividend every year in perpetuity. If this issue currently sells for $93 per share, what is the required return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Required return

%

8.

Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $15 per share dividend 10 years from today and will increase the dividend by 5 percent per year thereafter. If the required return on this stock is 14.5 percent, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Current share price

$

9.

Lohn Corporation is expected to pay the following dividends over the next four years: $18, $14, $13, and $7.50. Afterward, the company pledges to maintain a constant 4 percent growth rate in dividends forever. If the required return on the stock is 14 percent, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Current share price

$

10.

Antiques R Us is a mature manufacturing firm. The company just paid a dividend of $11.90, but management expects to reduce the payout by 5 percent per year indefinitely. If you require a return of 12 percent on this stock, what will you pay for a share today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Current share price

$

10.

A7X Corp. just paid a dividend of $2.10 per share. The dividends are expected to grow at 24 percent for the next eight years and then level off to a growth rate of 6 percent indefinitely. If the required return is 13 percent, what is the price of the stock today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Stock price

$ 1. Cannonier, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1 $ 960 2 1,190 3 1,410 4 2,150 If the discount rate is 9 percent, what is the future value of these cash flows in Year 4? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Future value $ What is the future value at a discount rate of 12 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Future value $ What is the future value at a discount rate of 23 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Future value $ 2. Investment X offers to pay you $5,800 per year for 9 years, whereas Investment Y offers to pay you $8,600 per year for 5 years. If the discount rate is 5 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Present value Investment X $ Investment Y $ If the discount rate is 15 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Present value Investment X $ Investment Y $ 3. Huggins Co. has identified an investment project with the following cash flows. Year Cash Flow 1 $ 790 2 1,070 3 1,330 4 1,450 If the discount rate is 9 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value $ What is the present value at 17 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value $ What is the present value at 25 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value $ 4. An investment offers $6,500 per year for 20 years, with the first payment occurring one year from now. If the required return is 7 percent, what is the value of the investment? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) Present value $ What would the value be if the payments occurred for 45 years? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) Present value $ What would the value be if the payments occurred for 70 years? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) Present value $ What would the value be if the payments occurred forever? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) Present value $ 5. If you put up $42,000 today in exchange for a 6.5 percent, 16-year annuity, what will the annual cash flow be? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) Annual cash flow $ 6. The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $23,000 per year forever. If the required return on this investment is 5.3 percent, how much will you pay for the policy? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) Present value $ 7. Find the EAR in each of the following cases (Use 365 days a year. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.): Stated Rate (APR) Number of Times Compounded Effective Rate (EAR) 9.4 % Quarterly % 18.4 Monthly 14.4 Daily 11.4 Infinite 8. Tai Credit Corp. wants to earn an effective annual return on its consumer loans of 14.2 percent per year. The bank uses daily compounding on its loans. What interest rate is the bank required by law to report to potential borrowers? (Use 365 days a year. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Interest rate % 9. What is the future value of $1,600 in 18 years assuming an interest rate of 6.9 percent compounded semiannually? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Future value $ 10. An investment will pay you $50,000 in 11 years. If the appropriate discount rate is 7.7 percent compounded daily, what is the present value? (Use 365 days a year. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value $

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