1. Adams Company stock paid a dividend of $3.00 from last year, and $3.25 from this year. The increase in the dividend is similar to the long term growth of the company. Considering the risk, your required rate of return from this stick is 14%. Find the price of stock.
2. The current price of Ford stock is $50 a share and it has paid a dividend of $4.00 this year. The required rate of return for Ford shareholders is 16%. What is the expected growth rate of Ford?
3.Moscow Company has paid a constant dividend of $3.00 per share every year, and it expects to do so in the future. If your required rate of return for this investment is 17% ,what should you expect to pay for a share of Moscow stock?
Solution is attached as MS Word document also.
Long run growth of company=Growth in dividend=g=(3.25-3)/3=8.3333%
D0=Dividend in current year=$3.25
D1=Expected dividend next …
There are three problems. Solutions to these problems explain the steps to calculate price of stock and expected growth of company.