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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
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Phoniex University
Oct-2001 - Nov-2016
Yesterday, September 22, 2009, Wireless Logic Corp. (WLC) paid its annual dividend of $1.25 per share. Because WLC’s financial prospects are particularly bright, investors believe the company will increase its dividend by 20 percent per year for the next four years. After that, investors believe WLC will increase the dividend at a modest annual rate of 4 percent. Investors require a 16 percent return on WLC stock, and WLC always makes its dividend payment on September 22 of each year.
a. What is the price of WLC stock on September 23, 2009?
b. What is the price of WLC stock on September 23, 2010?
c. Calculate the percentage change in price of WLC stock from September 23, 2009, to September 23, 2010.
d. For an investor who purchased WLC stock on September 23, 2009, received a dividend on September 22, 2010, and sold the stock on September 23, 2010, what was the total rate of return on the investment? How much of this return came from the dividend, and how much came from the capital gain?
e. What is the price of WLC stock on September 23, 2013?
f. What is the price of WLC stock on September 23, 2014?
g. For an investor who purchased WLC stock on September 23, 2013 received a dividend on September 22, 2014, and sold the stock on September 23, 2014, what was the total rate of return on the investment? How much of this return came from the dividend, and how much came from the capital gain? Comment on the differences between your answers to this question and your answers to part (d).
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