Investment Problems

1.Xytex Products just paid a dividend of $1.92 per share, and the stock currently sells for $38. If the discount rate is 15 percent, what is the dividend growth rate?

 

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2.You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn has a reported equity beta of 1.6, a debt-to-equity ratio of .4, and a tax rate of 40 percent. Based on this information, what is Lauryn’s asset beta?

 

 

3.JJ Industries will pay a regular dividend of $.65 per share for each of the next four years. At the end of the four years, the company will also pay out a $71 per share liquidating dividend, and the company will cease operations. If the discount rate is 8 percent, what is the current value of the company’s stock?

 

4.Able, Baker, and Charlie are the only three stocks in an index. The stocks sell for $55, $312, and $92, respectively. If Able undergoes a 3-for-4 reverse stock split, what is the new divisor? 

 

Star Light & Power increases its dividend 2.3 percent per year every year. This utility is valued using a discount rate of 10 percent, and the stock currently sells for $46 per share. If you buy a share of stock today and hold on to it for at least three years, what do you expect the value of your dividend check to be three years from today?