1) IBM just paid a dividend of $1.25. Analysts expect dividends to grow at a continual rate of 4% per year. Currently investors expect a 9% rate of return on the stock. a. How much would you pay for one share of IBM? b. If the stock is currently selling for $30 per share would you buy it? If IBM has 800 million shares outstanding, what is the current market value of the Company? C.

C) Trusty gets’ Lucky Ltd., just paid a dividend of $2.00 per share. The managing director just announced that it is planned to increase dividends at a rate of 6% indefinitely. An appropriate discount rate for this company is 16% per annum.    What is the firm’s expected dividend stream over the next 3 years? What is the firm’s current stock price? What is the firm’s expected value in one year? What are the expected dividend yield, capital gains yield and total return during the first year?

Samsung just paid an annual dividend of $2.1. The company has a required return of 10%. You now think that dividends will grow by 4% from year to year. What is the value of the stock?

Storico Company just paid a dividend of $2.10 per share. The company will increase its dividend by 20 percent next year and then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the stock price is $41.71, what required return must investors be demanding on the company's stock? (Hint: Set up the valuation formula with all the relevant cash flows, and use trial and error to find the unknown rate of return.)