# Stock Valuation Problems - University of New Mexico

Stock Valuation Problems If you expect the dividend in one year to be \$ 2.25 and you expect it to grow at a constant rate each year of 5%, what do you believe the stock is worth assuming your RoR on the stock is 15.5?

Mtech has lost a big contract, so its sales are falling. As a result, the companys earnings and dividends are declining at a constant rate of 5% per year. If D0 = \$5 and ks = 15%, what is value of McCue Minings stock? Mtech Corp. investors expect Mtech to begin paying dividends, with the first

dividend of \$2 coming 1 year from today and should grow at a constant rate of 8% per year. If the rate of return is 15%, what is the value of the stock today? Mtech Corp. is expanding rapidly, and it currently needs to retain all of its earnings; hence, it does not pay any dividends. However, investors expect Mtech to begin paying

dividends, with the first dividend of \$2 coming 3 years from today. The company should grow at a constant rate of 8% per year. If the rate of return is 15%, what is the value of the stock today? Mtech Corp. is expanding rapidly, and it currently needs to retain all of its earnings; hence, it does not pay any dividends. However,

investors expect Mtech to begin paying dividends, with the first dividend of \$2 in one year. The dividend should grow rapidly at a rate of 50% per year during years 2 and 3. After year 3, the company should grow at a constant rate of 8% per year. If the rate of return is 15%, what is the value of the stock today?

Mtech Corp. is expanding rapidly, and it currently needs to retain all of its earnings; hence, it does not pay any dividends. However, investors expect Mtech to begin paying dividends, with the first dividend of \$2 coming 3 years from today. The dividend should grow rapidly at a rate of 50% per year during years 4 and 5. After year 5, the company should grow at a constant rate of 8% per year. If the

rate of return is 15%, what is the value of the stock today? You expect your company to pay the following dividend pattern for three years as follows: D1 = \$1, D2 = \$2, D3=\$3. After three years the dividends are expected to grow at a constant rate of 6% per year. If the required rate of return demanded by investors is 15%, what is the current price of your companies stock? If your stock was selling on

the market for \$25.50 would this stock be in equilibrium? Radtech is a high-tech. The company is three years old and has experienced spectacular growth since its inception. It is not expected for Radtech to pay dividends for the next 5 years. You believe they will start paying in year six with the first dividend being \$25. After that you expect Radtech to pay a constant dividend of \$6 per share the foreseeable future. If the appropriate discount rate is 12% and the

current market price is \$25, is the stock work the price on the market?

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