QUESTION 6

RAM Co has a dividend payout ratio of 25% (which means it has a retention ratio of 75%) If Return on Earnings is 8%, what is the expected growth rate for dividends?

10 points

QUESTION 7

Patriot, Inc has just paid a $200 annual dividend on its common stock The dividend is expected to grow at a constant rate of 6% per year indefinitely Based on market risk conditions and Patriot’s beta value, the required rate of return on Patriot’s stock is 13% Calculate the current value of Patriot’s stock

10 points

QUESTION 8

Perry, Inc has just paid a $100 annual dividend on its common stock The dividend is expected to grow at a constant rate of 2% per year indefinitely Based on market risk conditions and Perry’s beta value, the required rate of return on Patriot’s stock is 16% Calculate the current value of Perry’s stock

10 points

QUESTION 9

Tango, Inc has just paid a $350 annual dividend on its common stock The dividend is expected to grow at a constant rate of 6% per year indefinitely Based on market risk conditions and Tango’s beta value, the required rate of return on Patriot’s stock is 12% Calculate the current value of Tango’s stock

10 points

QUESTION 10

Foxtrot, Inc has just paid a $300 annual dividend on its common stock The dividend is expected to grow at a constant rate of 5% per year indefinitely Based on market risk conditions and Foxtrot’s beta value, the required rate of return on Patriot’s stock is 10% Calculate the current value of Foxtrot’s stock

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