Stock valuation | Business & Finance homework help

If you require a return of 9 percent on your investment, how much will you pay for the company’s stock today?




Raffalovich, Inc., is expected to maintain a constant 5.45 percent growth rate in its dividends, indefinitely.


If the company has a dividend yield of 3.95 percent, what is the required return on the company’s stock?





You’ve collected the following information from your favorite financial website.
52-Week Price

Stock (Div) Div
Yld %
Hi Lo
79.3        10.62          Palm Coal 0.55 3.5       6        15.80     –0.24    
55.81        33.42          Lake Lead Grp 1.54 3.8       10        40.43     –0.01    
130.93        69.50          SIR 2.00 2.2       10        88.97     3.07    
50.24        13.95          DR Dime 0.80 5.2       6        15.43     –0.26    
35.00        20.74          Candy Galore 0.32 1.5       28        ??       0.18    


According to your research, the growth rate in dividends for Palm Coal for the previous 10 years has been 4.25 percent.


If investors feel this growth rate will continue, what is the required return for Palm Coal stock?





Antiques ‘R’ Us is a mature manufacturing firm. The company just paid a dividend of $11.10, but management expects to reduce the payout by 5 percent per year, indefinitely.


If you require a return of 11 percent on this stock, what will you pay for a share today?

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