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1 May 2019

Diets For You announced today that it will begin paying annual dividends next year. The first dividend will be $0.12 a share. The following dividends will be $0.15, $0.20, $0.50, and $0.75 a share annually for the following 4 years, respectively. After that, dividends are projected to increase by 4 percent per year. How much are you willing to pay to buy one share of this stock today if your desired rate of return is 8.5 percent?

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Nelly Stracke
Nelly StrackeLv2
2 May 2019

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Diets For You announced today that it will begin paying annualdividends next year. The first dividend will be $1.25 a share. Thefollowing dividends will be $0.25, $0.25, $0.50, and $0.75 a shareannually for the following 4 years, respectively. At the end of thefifth year, the stock could be sold for $18. How much are youwilling to pay to buy one share of this stock today if your desiredrate of return is 8.5 percent?

Please show work

Catfish, Inc. just paid $1.27 to its shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 4.37 percent. If you require a rate of return of 7.35 percent, how much are you willing to pay today to purchase one share of Catfish stock?

The 7 percent bonds issued by Modern Kitchens pay interestsemiannually, mature in eight years, and have a $1,000 face value.Currently, the yield to maturity for these bonds is 7.22%. What isthe market price per bond?

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S.S. Corporation’s bonds will mature in 15 years. The bonds havea face value of $1,000 and

an 6.5 percent coupon rate, paid semiannually. The price of thebonds is $1,050. What is the yield to maturity?

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Callaghan Motor’s bonds have 7 years remaining to maturity.Interest is paid annually, the

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$869.84

2). What is the current yield?

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3). What is the capital gains yield?

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Discount.

Nungesser Corporation has issued bonds that have a 9 percentcoupon rate, payable

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Problem set 2

Homework: 1, 3, 4, 6, 8, 9, 11, 12

Suppose you are thinking of purchasing the stock of Moore Oil,Inc. You expect the stock to pay a dividend of $0.75 per share atthe end of Year 1 and $1.75 per share at the end of Year 2. Youbelieve you can sell the stock for $15.50 at the end of Year 2.What is the value per share of the company’s stock if the requiredrate of return is 12 percent?

$14.42

Investors expect Microtech to pay the first dividend of $1.25 atthe end of Year 2. The dividend should grow at a rate of 8 percentper year during Years 3, 4, and 5. The stock can be sold for $42 atthe end of Year 5. Determine the current market value of thecompany’s stock if the required rate of return is 12 percent.

$27.61

Diets For You announced today that it will begin paying annualdividends next year.

The first dividend will be $1.25 a share. The followingdividends will be $0.25, $0.25,

$0.50, and $0.75 a share annually for the following 4 years,respectively. At the end of

the fifth year, the stock could be sold for $18. How much areyou willing to pay to buy

one share of this stock today if your desired rate of return is8.5 percent?

$14.39

Please Show all work and steps typed as I am onmobile

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