Shirley’S Cool Treats Is Expecting Their Ice Cream Sales To Decline

1) Shirley’s Cool Treats is expecting their ice cream sales to decline due to the increased interest in healthy eating. Thus, the company has announced that they will be reducing their annual dividend by 4 percent a year for the next four years. After that, they will maintain a constant dividend of $1 a share. Last year, the company paid $1. 80 per share. What is this stock worth to you if you require a 12 percent rate of return? (10 marks)2) Excel Corporation is issuing some new preferred shares. The preferred stock will pay a perpetual dividend of $10. 00 per year beginning 10 years from now. The ROM Corporation is issuing preferred shares that pay a dividend of 11 percent on a $50 par value. Both preferred shares require a return of 7 percent. Which preferred share will sell for a higher price in the market today? Show your work. (8 marks)3) Bliley Plumbers pays no dividend at the present time. The company plans to start paying an annual dividend in the amount of $0. 20 a share for three years commencing three years from today. After that time, the company plans on paying a constant $1 a share dividend indefinitely. How much are you willing to pay to buy a share of this stock if your required return is 15 percent? (8 marks)4) Gloria’s Boutique of Ottawa recently paid $1. 65 as an annual dividend. Future dividends are projected at $1. 68, $1. 72, $1. 76, and $1. 80 over the next four years, respectively. Immediately after the dividend in year 4, the dividend is expected to increase by 2. 5 percent annually. What is one share of this stock worth to you if you require an 11 percent rate of return on similar investments? (10 marks)5) Shares of Do Naught common stock are currently selling for $46. 90. The last dividend paid was $2. 21 per share and the market rate of return is 15. 8 percent. At what rate is the dividend growing? (4 marks)6) Salty Inc has just invented a new type of snack made out of broccoli. Given the phenomenal market response to this product, Salty Inc is reinvesting all of its earnings to expand its operations. Earnings were $2 per share this past year and are expected to grow at a rate of 20% per year until the end of year 4. At that point, other companies are likely to bring out competing products. Analysts project that at the end of year 4, Salty Inc. will cut investment and begin paying 60% of its earnings as dividends. Following this payment, growth will slow to a long-run rate of 4%. If you have a required return of 8%, what would you be willing to pay for a share of Salty Inc’s stock? (5 marks)7) Bloom Inc. has just paid an annual dividend of $0. 96. Analysts are predicting an 11% growth rate in earnings over the next five years. After then, Bloom’s earnings are expected to grow at the current industry average of 5. 2% per year. If you have a required rate of return of 8. 5%, would you be willing to purchase the stock for $40? Show your work. (8 marks)8) Pink Inc. expects to have earnings per share of $6 in the coming year. Rather than reinvest these earnings and grow, the firm plans to pay out all earnings as dividends. (8 marks)a) If shareholders have a required return of 10%, what is Pink’s current share price? (3 marks)b) Suppose Pink Inc. decides to reduce its dividend payout ratio to 75% and use the retained earnings to open new stores. The return on its investment in these new stores (ROE) is expected to be 12%. Assuming the risk does not change and the required return stays at 10%, what effect would this new policy have on Pink’s stock price? Show your work. (5 marks)9) Citadel Holdings is experiencing rapid growth. The company expects dividends to grow at 15% per year for the next 7 years before leveling off at 6% into perpetuity. The required return on the company’s stock is 11%. The dividend per share just paid was $1. 25. (14 marks)a) Calculate the current market value of Citadel Holdings’ stock. (5 marks)b) Calculate the expected market price in one year. (5 marks)c) Calculate the expected dividend yield and capital gains yield expected during the first year. (4 marks)

Order Now

Shirley’S Cool Treats Is Expecting Their Ice Cream Sales To Decline

1) Shirley’s Cool Treats is expecting their ice cream sales to decline due to the increased interest in healthy eating. Thus, the company has announced that they will be reducing their annual dividend by 4 percent a year for the next four years. After that, they will maintain a constant dividend of $1 a share. Last year, the company paid $1.80 per share. What is this stock worth to you if you require a 12 percent rate of return? (10 marks)2) Excel Corporation is issuing some new preferred shares. The preferred stock will pay a perpetual dividend of $10.00 per year beginning 10 years from now. The ROM Corporation is issuing preferred shares that pay a dividend of 11 percent on a $50 par value. Both preferred shares require a return of 7 percent. Which preferred share will sell for a higher price in the market today? Show your work. (8 marks)3) Bliley Plumbers pays no dividend at the present time. The company plans to start paying an annual dividend in the amount of $0.20 a share for three years commencing three years from today. After that time, the company plans on paying a constant $1 a share dividend indefinitely. How much are you willing to pay to buy a share of this stock if your required return is 15 percent? (8 marks)4) Gloria’s Boutique of Ottawa recently paid $1.65 as an annual dividend. Future dividends are projected at $1.68, $1.72, $1.76, and $1.80 over the next four years, respectively. Immediately after the dividend in year 4, the dividend is expected to increase by 2.5 percent annually. What is one share of this stock worth to you if you require an 11 percent rate of return on similar investments? (10 marks)5) Shares of Do Naught common stock are currently selling for $46.90. The last dividend paid was $2.21 per share and the market rate of return is 15.8 percent. At what rate is the dividend growing? (4 marks)6) Salty Inc has just invented a new type of snack made out of broccoli. Given the phenomenal market response to this product, Salty Inc is reinvesting all of its earnings to expand its operations. Earnings were $2 per share this past year and are expected to grow at a rate of 20% per year until the end of year 4. At that point, other companies are likely to bring out competing products. Analysts project that at the end of year 4, Salty Inc. will cut investment and begin paying 60% of its earnings as dividends. Following this payment, growth will slow to a long-run rate of 4%. If you have a required return of 8%, what would you be willing to pay for a share of Salty Inc’s stock? (5 marks)7) Bloom Inc. has just paid an annual dividend of $0.96. Analysts are predicting an 11% growth rate in earnings over the next five years. After then, Bloom’s earnings are expected to grow at the current industry average of 5.2% per year. If you have a required rate of return of 8.5%, would you be willing to purchase the stock for $40? Show your work. (8 marks)8) Pink Inc. expects to have earnings per share of $6 in the coming year. Rather than reinvest these earnings and grow, the firm plans to pay out all earnings as dividends. (8 marks)a) If shareholders have a required return of 10%, what is Pink’s current share price? (3 marks)b) Suppose Pink Inc. decides to reduce its dividend payout ratio to 75% and use the retained earnings to open new stores. The return on its investment in these new stores (ROE) is expected to be 12%. Assuming the risk does not change and the required return stays at 10%, what effect would this new policy have on Pink’s stock price? Show your work. (5 marks)9) Citadel Holdings is experiencing rapid growth. The company expects dividends to grow at 15% per year for the next 7 years before leveling off at 6% into perpetuity. The required return on the company’s stock is 11%. The dividend per share just paid was $1.25. (14 marks)a) Calculate the current market value of Citadel Holdings’ stock. (5 marks)b) Calculate the expected market price in one year. (5 marks)c) Calculate the expected dividend yield and capital gains yield expected during the first year. (4 marks)

Order Now