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For Neo Chapter 11 The dividend-growth model may be used

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For Neo
Chapter 11
      The dividend-growth model may be used to value a stock:     (beside the d is a lower case 0)
V=( D (1+g))/(k-g)


      What I the value of stock if:          

D = $2         (beside the d is a lower case 0)

K=10%

g=6%

      What is the value of this stock if the dividend is increased to $3 and the other variables remain constant?
     What is the value of this stock if the required return declines to 7.5 percent and the other variables remain constant?
     What is the value of this stock if the growth rate declines to 4 percent and the other variables remain constant?
     What is the value of this stock if the dividend is increased to $2.30, the growth rate declines to 4 percent, and the required return remains 10 percent?
      Last year Artworks, Inc. paid a dividend of $3.50. you anticipate that the company’s growth rat is 10 percent and have required rate of return of 15 percent for this type of equity investment. What is the maximum price you would be willing to pay for the stock
     An investor with a required return of 14 percent for very risky investments in common stock has analyzed three firms and must decide which, if any, to purchase. The information is as follows:
     Jersey mining has a beta coefficient of 1.2. Currently the risk-free rate is 5 percent and the anticipated return on the market is 11 percent. JJM pays a $4.50 dividend that is growing at 6 percent annually.
      What is the required return for JJM
     Given the required return, what is the value of the stock?
     If the stock is selling for $80, what should you do?
     If the beta coefficient declines to 1.0 what is the new value of the stock
     If the price remains $80, what course of action should you take given the valuation in (d)?
Chapter 14
      Big Oil Inc. has preferred stock outstanding that pays a $9 annual dividend. If investors’ required rate of return is 13 percent, what is the market value of the shares? If the required return declines to 11 percent, what is the change in the price of the stock?
     What should be the price of the following preferred stocks if comparable securities yield 7 percent? Why are the valuations different?
      MN Inc., $8 preferred (100 par)
     CH Inc., $8 preferred (100 par) with mandatory retirement after 20 years
      You are considering purchasing the preferred stock of a firm but are concerned about its capacity to pay the dividend. To help allay that fear, you compute the times-preferred-dividend-earned ratio for the past three years from the following data taken from the firm’s statements:
Year                     X1               X2                 X3
Operating income          $12,000,000          $15,000,000     $17,000,000
Interest              ;           3,000,000          5,900,000     11,000,000
Taxes                        4,000,000          5, 400,000     4,000,000
Preferred dividends              1,000,000          1,000,000     1,500,000
Common dividends              3,000,000           2,000,000      __
What does your analysis indicate about the firm’s capacity to pay preferred stock dividends?
Submitted: 5 years ago.
Category: Homework
Expert:  Neo replied 5 years ago.

Good day!

 

I am almost done with everything but I notice that I don't have any idea bout this problem:

 

What should be the price of the following preferred stocks if comparable securities yield 7 percent? Why are the valuations different?
MN Inc., $8 preferred (100 par)
CH Inc., $8 preferred (100 par) with mandatory retirement after 20 years

 

I hope you could provide me with formula.

 

Thank you so much! :)

Customer: replied 5 years ago.
I will relook and let u know in a min
Customer: replied 5 years ago.
i found the formula for valuation (pricing) of preferred stock will send in a min
Customer: replied 5 years ago.
hey Neo I did the formula in word but when i tried to copy and paste here it would not work can i send it to you any other way
Expert:  Neo replied 5 years ago.

Please upload the file in http://www.mediafire.com/ and please post the sharing link here.

Customer: replied 5 years ago.
Expert:  Neo replied 5 years ago.

I have this formula. What I am actually looking for iare the ones when preferred has mandatory retirement and the one with not.

Expert:  Neo replied 5 years ago.
It's ok. I think got it. This is a case of annuity and perpetuity. Am I right?
Customer: replied 5 years ago.
yes that is correct
Customer: replied 5 years ago.
the answer is a. <strong>$114.29 b. 110.55</strong>
Expert:  Neo replied 5 years ago.
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Category: Homework
Satisfied Customers: 12040
Experience: BS Accounting
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