{"id":530,"date":"2023-03-28T16:14:23","date_gmt":"2023-03-28T16:14:23","guid":{"rendered":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/?post_type=chapter&p=530"},"modified":"2023-04-03T03:46:31","modified_gmt":"2023-04-03T03:46:31","slug":"review-problems-4","status":"publish","type":"chapter","link":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/chapter\/review-problems-4\/","title":{"raw":"Review Problems","rendered":"Review Problems"},"content":{"raw":"
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Chapter 8 Review Problems<\/h2>\r\n1<\/span>. <\/span>Today, Sysco Enterprises paid dividends on its common stock of $1.25 per share. If dividends per share are expected to increase to $3.50 per share six years from now, what is the percentage dividend growth rate?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\n \r\n\r\n2<\/span>. <\/span>Let\u2019s say you want to purchase shares of Fontaine Ltd. and then hold this stock for six years. The company has a stated dividend policy of $2.00 annually per share for the next six years, at the end of which time you will sell the stock. You expect to be able to sell the stock for $35.00 at that time. If you want to earn an 8% return on this investment, what price should you pay today for this stock?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\n \r\n\r\n3<\/span>. <\/span>Damian Painting Systems has established a dividend policy of $3.00 per share per year. If the company plans to be in business forever, what is the value of this stock if an investor wants a 10% return?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\n \r\n\r\n4<\/span>. <\/span>Wilk Productions wants its shareholders to earn a 12% return on their investment in the company. At what value would Wilk stock be priced if the company paid $2.75 per share in constant annual dividends forever?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\n \r\n\r\n5<\/span>. <\/span>Dax Industrial Systems has stock currently priced at $50.00 per share. If investors are earning a 7% return on Dax Industrial, what is the company\u2019s annual dividend payment per share?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\n \r\n\r\n6<\/span>. <\/span>If a stock is selling at $400 with a current dividend of $40 and a potential investor\u2019s required rate of return is 15%, what would be the anticipated dividend growth rate?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\n \r\n\r\n7<\/span>. <\/span>Mind Max Inc. has a dividend policy that increases annual dividends by 3% each year. If last year\u2019s dividend was $2.00, the company intends to stay in business for 50 years, and an investor wants a 9% return, what would be the price of Mind Max stock?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\n \r\n\r\n8<\/span>. <\/span>Odon Corp. paid dividends today in the amount of $1.50 per share. If Odon will pay dividends of $5.00 10 years from today, what is the annual dividend growth rate over this 10-year period?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\n \r\n\r\n9<\/span>. <\/span>The Kirkson Distributors common stock is currently selling at $52.00 per share, pays dividends annually at $2.50 per share, and has an annual dividend growth rate of 2%. What is the required return?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n<\/section>
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\r\n\r\n \r\n\r\n10<\/span>. <\/span>If a preferred share of stock pays dividends of $2.50 per year and the required rate of return for the stock is 6%, what is its intrinsic value?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n<\/section> \r\n\r\nThis chapter is from \u201cPrinciples of Finance\u201d \u00a0https:\/\/openstax.org\/books\/principles-finance\/pages\/1-why-it-matters<\/a> by Dahlquist and Knight. This book is licensed under the CC-BY<\/a> 4.0 license. 2022 OpenStax.","rendered":"
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Chapter 8 Review Problems<\/h2>\n

1<\/span>. <\/span>Today, Sysco Enterprises paid dividends on its common stock of $1.25 per share. If dividends per share are expected to increase to $3.50 per share six years from now, what is the percentage dividend growth rate?<\/span><\/p>\n<\/div>\n<\/div>\n

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\n

 <\/p>\n

2<\/span>. <\/span>Let\u2019s say you want to purchase shares of Fontaine Ltd. and then hold this stock for six years. The company has a stated dividend policy of $2.00 annually per share for the next six years, at the end of which time you will sell the stock. You expect to be able to sell the stock for $35.00 at that time. If you want to earn an 8% return on this investment, what price should you pay today for this stock?<\/span><\/p>\n<\/div>\n<\/div>\n

\n
\n

 <\/p>\n

3<\/span>. <\/span>Damian Painting Systems has established a dividend policy of $3.00 per share per year. If the company plans to be in business forever, what is the value of this stock if an investor wants a 10% return?<\/span><\/p>\n<\/div>\n<\/div>\n

\n
\n

 <\/p>\n

4<\/span>. <\/span>Wilk Productions wants its shareholders to earn a 12% return on their investment in the company. At what value would Wilk stock be priced if the company paid $2.75 per share in constant annual dividends forever?<\/span><\/p>\n<\/div>\n<\/div>\n

\n
\n

 <\/p>\n

5<\/span>. <\/span>Dax Industrial Systems has stock currently priced at $50.00 per share. If investors are earning a 7% return on Dax Industrial, what is the company\u2019s annual dividend payment per share?<\/span><\/p>\n<\/div>\n<\/div>\n

\n
\n

 <\/p>\n

6<\/span>. <\/span>If a stock is selling at $400 with a current dividend of $40 and a potential investor\u2019s required rate of return is 15%, what would be the anticipated dividend growth rate?<\/span><\/p>\n<\/div>\n<\/div>\n

\n
\n

 <\/p>\n

7<\/span>. <\/span>Mind Max Inc. has a dividend policy that increases annual dividends by 3% each year. If last year\u2019s dividend was $2.00, the company intends to stay in business for 50 years, and an investor wants a 9% return, what would be the price of Mind Max stock?<\/span><\/p>\n<\/div>\n<\/div>\n

\n
\n

 <\/p>\n

8<\/span>. <\/span>Odon Corp. paid dividends today in the amount of $1.50 per share. If Odon will pay dividends of $5.00 10 years from today, what is the annual dividend growth rate over this 10-year period?<\/span><\/p>\n<\/div>\n<\/div>\n

\n
\n

 <\/p>\n

9<\/span>. <\/span>The Kirkson Distributors common stock is currently selling at $52.00 per share, pays dividends annually at $2.50 per share, and has an annual dividend growth rate of 2%. What is the required return?<\/span><\/p>\n<\/div>\n<\/div>\n<\/section>\n

\n
\n
\n

 <\/p>\n

10<\/span>. <\/span>If a preferred share of stock pays dividends of $2.50 per year and the required rate of return for the stock is 6%, what is its intrinsic value?<\/span><\/p>\n<\/div>\n<\/div>\n<\/section>\n

 <\/p>\n

This chapter is from \u201cPrinciples of Finance\u201d \u00a0https:\/\/openstax.org\/books\/principles-finance\/pages\/1-why-it-matters<\/a> by Dahlquist and Knight. This book is licensed under the CC-BY<\/a> 4.0 license. 2022 OpenStax.<\/p>\n","protected":false},"author":101,"menu_order":19,"template":"","meta":{"pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-530","chapter","type-chapter","status-publish","hentry"],"part":34,"_links":{"self":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/530","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/users\/101"}],"version-history":[{"count":5,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/530\/revisions"}],"predecessor-version":[{"id":1390,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/530\/revisions\/1390"}],"part":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/parts\/34"}],"metadata":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/530\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/media?parent=530"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapter-type?post=530"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/contributor?post=530"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/license?post=530"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}