Maurice Tutor

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Teaching Since: May 2017
Last Sign in: 402 Weeks Ago
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  • MCS,PHD
    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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  • Professor
    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 18 Aug 2017 My Price 5.00

rate of return

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

Answers

(5)
Status NEW Posted 18 Aug 2017 06:08 PM My Price 5.00

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