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31. Value of a Preferred Stock If a preferred stock from Pfizer Inc. (PFE) pays $3.00 in
annual dividends, and the required return on the preferred stock is 7 percent, what's the value of
the stock?
32. Value of a Preferred Stock If a preferred stock from Ecology and Environment, Inc. (EEI)
pays $2.50 in annual dividends, and the required return on the preferred stock is 5.8 percent,
what's the value of the stock?
33. P/E Ratio and Stock Price International Business Machines (IBM) has earnings per
share of $6.85 and a P/E ratio of 15.19. What is the stock price?
34. P/E Ratio and Stock Price Pfizer, Inc. (PFE) has earnings per share of $2.09 and a P/E
ratio of 11.02. What is the stock price?
35. P/E Ratio and Stock Price Ralph Lauren (RL) has earnings per share of $3.85 and a P/E
ratio of 17.37. What is the stock price?
36. Value of Dividends and Future Price A firm is expected to pay a dividend of $2.00 next
year and $2.14 the following year. Financial analysts believe the stock will be at their target price
of $75.00 in two years. Compute the value of this stock with a required return of 10 percent.
37. Value of Dividends and Future Price A firm is expected to pay a dividend of $3.00 next
year and $3.21 the following year. Financial analysts believe the stock will be at their target price
of $80.00 in two years. Compute the value of this stock with a required return of 13 percent.
38. Dividend Growth Annual dividends of Wal-Mart Stores (WMT) grew from $0.23 in 2000
to $0.83 in 2007. What was the annual growth rate?
39. Dividend Growth Annual dividends of Pfizer, Inc. (PFE) grew from $0.38 in 2000 to $1.15
in 2007. What was the annual growth rate?
40. Value a Constant Growth Stock Financial analysts forecast Best Buy Company (BBY)
growth for the future to be 13 percent. Their recent dividend was $0.49. What is the value of their
stock when the required rate of return is 14.13 percent?
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41. Value a Constant Growth Stock Financial analysts forecast Target Corp. (TGT) growth
for the future to be 11 percent. Their recent dividend was $0.52. What is the value of their stock
when the required rate of return is 11.89 percent?
42. Expected Return American Eagle Outfitters (AEO) recently paid a $0.38 dividend. The
dividend is expected to grow at a 15.5 percent rate. At the current stock price of $24.07, what is
the return shareholders are expecting?
43. Expected Return The Buckle (BKE) recently paid a $0.90 dividend. The dividend is
expected to grow at a 19 percent rate. At the current stock price of $43.17, what is the return
shareholders are expecting?
44. Expected Return Home Depot (HD) recently paid a $0.90 dividend. The dividend is
expected to grow at a 17 percent rate. At the current stock price of $33.08, what is the return
shareholders are expecting?
45. Dividend Initiation and Stock Value A firm does not pay a dividend. It is expected to pay
its first dividend of $0.10 per share in two years. This dividend will grow at 11 percent indefinitely.
Using a 13 percent discount rate, compute the value of this stock.
46. Dividend Initiation and Stock Value A firm does not pay a dividend. It is expected to pay
its first dividend of $0.15 per share in three years. This dividend will grow at 9 percent
indefinitely. Using a 10 percent discount rate, compute the value of this stock.
47. P/E Ratio Model and Future Price Walmart (WMT) recently earned a profit of $3.13 per
share and has a P/E ratio of 14.22. The dividend has been growing at a 12.5 percent rate over the
past few years. If this growth continues, what would be the stock price in five years if the P/E
ratio remained unchanged? What would the price be if the P/E ratio
declined
to 10 in five years?
48. P/E Ratio Model and Future Price Target Corp. (TGT) recently earned a profit of $3.57
earnings per share and has a P/E ratio of 17.3. The dividend has been growing at a 14 percent
rate over the past few years. If this growth continues, what would be the stock price in five years
if the P/E ratio remained unchanged? What would the price be if the P/E ratio
increased
to 23 in
five years?
49. Value of Future Cash Flows A firm recently paid a $1.00 annual dividend. The dividend
is expected to increase by 10 percent in each of the next four years. In the fourth year, the stock
price is expected to be $100. If the required rate for this stock is 14 percent, what is its value?
50. Value of Future Cash Flows A firm recently paid a $0.30 annual dividend. The dividend
is expected to increase by 8 percent in each of the next four years. In the fourth year, the stock
price is expected to be $60. If the required rate for this stock is 10 percent, what is its value?
