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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
1. Ten years ago a stock paid a $0.30 dividend. Since then it has split 2- for-1 twice. The current dividend is $0.16. If you have a required rate of return of 14 percent, what is the most you can pay for this stock?
2. Suppose you bought 100 shares of CenturyTel (CTL, NYSE) in December 1995 at $31.75.
a. How many shares would you own today?
b. If you sold it today, what would be your approximate holding period return?
3. A relatively new firm has the dividend payment history shown in Table 9-10. Suppose this stock sells for $8 per share. Estimate the shareholders’ required rate of return using the dividend discount model with the following:
a. The dividend growth rate calculated over the firm’s entire history.
b. The growth rate calculated over the actual dividend paying history only. Why are the two answers different? Which do you think is most meaningful?
Table 9.10
|
Year |
Dividends Paid |
|
2000 |
$0 |
|
2001 |
0 |
|
2002 |
0 |
|
2003 |
0 |
|
2004 |
0.10 |
|
2005 |
0.13 |
|
2006 |
0.15 |
|
2007 |
0.18 |
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