Stephanie was gifted $50,000.00 from grandparents and is looking to invest in stock options.  Stephanie will require a return of at least 9% on her stock investments and would have to pay 25% taxes on any interest income. Dividends will be tax-free. Stephanie wants to invest stock in the following companies 1. Pan-Elixir Ltd. is a pharmaceutical company. Its stock is fairly priced. Last year (t = 0), it paid a dividend of $2.50 per share to its shareholders. The company management hasestimated that it will be able to maintain a constant growth rate in dividends of 3% per annum. 2. Rebound Tourism Inc. is a travel planning establishment. Its shares sold for an average price of $40 per share last year (t = 0) and the management estimates to maintain a constant growth rate in dividends. Last year, it paid a dividend of $0.50 per share to its shareholders. 3. Cheers Inc. is a beverage producer. It pays a dividend of $1 per share to its shareholders, which is likely to remain constant over an indefinite time period.  4. Think-Local Inc. paid $0.75 per share as dividend last year (t = 0). The company expects that it will take next 2 years (till t = 2) to recover from the pandemic’s effects, during which time, its dividend will grow at a rate of 1.5% per annum. From year 3 onwards, the dividend growth rate is expected to settle at 2% per year indefinitely.  How many units of each stock from each company will Stephanie buy? Support your response with relevant computations

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Stephanie was gifted $50,000.00 from grandparents and is looking to invest in stock options.  Stephanie will require a return of at least 9% on her stock investments and would have to pay 25% taxes on any interest income. Dividends will be tax-free. Stephanie wants to invest stock in the following companies

1. Pan-Elixir Ltd. is a pharmaceutical company. Its stock is fairly priced. Last year (t = 0), it paid a dividend of $2.50 per share to its shareholders. The company management hasestimated that it will be able to maintain a constant growth rate in dividends of 3% per annum.


2. Rebound Tourism Inc. is a travel planning establishment. Its shares sold for an average price of $40 per share last year (t = 0) and the management estimates to maintain a constant growth rate in dividends. Last year, it paid a dividend of $0.50 per share to its shareholders.


3. Cheers Inc. is a beverage producer. It pays a dividend of $1 per share to its shareholders, which is likely to remain constant over an indefinite time period. 


4. Think-Local Inc. paid $0.75 per share as dividend last year (t = 0). The company expects that it will take next 2 years (till t = 2) to recover from the pandemic’s effects, during which time, its dividend will grow at a rate of 1.5% per annum. From year 3 onwards, the dividend growth rate is expected to settle at 2% per year indefinitely. 

How many units of each stock from each company will Stephanie buy? Support your response with relevant
computations

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