1. Dapper Wrapper Coat Corporation is currently expected to grow by 15% for each of

the next three years due to their superior cable television system. However,

thereafter growth is expected to level o! to 8% annually. DWC just paid a dividend of

$.75. Investors in the system have a required rate of return of 12%. What is the

value of DWC stock?

2.The Blizzard Wizard Snow Plows Corporation has been experiencing some tough times

lately. They predict that their growth rate will decline 10% for the next two years,

then decline further by 5% in the following two years. After that, the owners are

encouraged that their new product line will enhance the bottom line and growth will

expand to 16% for two years and then level o! to 5% for the foreseeable future.

Investors have a required rate of return of 15% and the last dividend paid was $1.15.

What would an investor be willing to pay for BWSP Corp. stock?

3.Frocks & Socks Clothiers has fallen on hard times. Its management expects to pay no

dividends for the next two years. However, in the third year expected dividends will

be $1.35 and it is expected to grow at a rate of 4% in the 4

th

year, 8% in the 5

th

year,

and 12% in the 6

th

year and thereafter. If the required return for Frocks Corporation is

20%, what would be the price of the stock today?

4.Free Press Magazine Inc., is experiencing a slump. Their dividends are expected to

decline at a rate of 10% for three years. After that, with the new terminal, FP expects

dividends to increase at a constant rate of 8% for the foreseeable future. FP just paid

a dividend of $1.75. Investors in FP have a required return of 12%. What would an

investor be willing to pay for FP stock?

5.Listed below are the dividends paid for Waterproof Roof Manufacturing Stock.

Although the company had a bad stretch of earnings several years ago, management

believes that they are on a course that will maintain their current rate of growth.

Investors require a 18% return on this company’s stock. Waterproof stock sells for

$42.75 per share. Would you pay $42.75 for the stock and if not, what would be a fair

price for Waterproof?

YearDividends

2014$1.75

2013 1.73

2012 1.70

2011 1.68

2010 1.65

2009 1.60

2008 1.58

6.What would be a fair price for Gold Mind Memory Techniques, Inc., if the dividends

earned are as listed below? Gold Mind stock has a rate of return of 14%.

YearDividends

2014 $ 1.90

2013 1.85

2012 1.80

2011 1.76

• 7.How much should a share of Up and Coming Preferred stock sell for if it currently has

  a dividend of $115 and it provides a return of 12%?

  Answers:$8.88$24.26$10.55 $28.01$11.19 No

  $958.33$17.82

  $28.19$5.23