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Stock Values The Starr Co. just paid a dividend of \(\$ 1.90\) per share on its stock. The dividends are expected to grow at a constant rate of 5 percent per year, indefinitely. If investors require a 12 percent return on the stock, what is the current price? What will the price be in three years? In 15 years?

Stock Valuation Siblings, Inc., is expected to maintain a constant 5.8 percent growth rate in its dividends, indefinitely. If the company has a dividend yield of 4.7 percent, what is the required return on the company's stock?

Growth Rate The newspaper reported last week that Bennington Enterprises earned \$28 million this year. The report also stated that the firm's return on equity is 15 percent. Bennington retains 70 percent of its earnings. What is the firm's earnings growth rate? What will next year's earnings be?

Nonconstant Dividends North Side Corporation is expected to pay the following dividends over the next four years: \(\$ 9, \$ 7, \$ 5\), and \(\$ 2.50\). Afterwards, the company pledges to maintain a constant 5 percent growth rate in dividends forever. If the required return on the stock is 13 percent, what is the current share price?

Differential Growth Hughes Co. is growing quickly. Dividends are expected to grow at a 25 percent rate for the next three years, with the growth rate falling off to a constant 7 percent thereafter. If the required return is 12 percent and the company just paid a \(\$ 2.40\) dividend, what is the current share price?

Differential Growth Janicek Corp. is experiencing rapid growth. Dividends are expected to grow at 30 percent per year during the next three years, 18 percent over the following year, and then 8 percent per year indefinitely. The required return on this stock is 13 percent, and the stock currently sells for \(\$ 65\) per share. What is the projected dividend for the coming year?

Finding the Dividend Mau Corporation stock currently sells for \(\mathbf{\$ 4 9 . 8 0}\) per share. The market requires an 11 percent return on the firm's stock. If the company maintains a constant 5 percent growth rate in dividends, what was the most recent dividend per share paid on the stock?

Valuing Preferred Stock Fifth National Bank just issued some new preferred stock. The issue will pay a \(\$ 7\) annual dividend in perpetuity, beginning five years from now. If the market requires a 6 percent return on this investment, how much does a share of preferred stock cost today?

Dividend Growth Four years ago, Bling Diamond, Inc., paid a dividend of \(\$ 1.20\) per share. Bling paid a dividend of \(\$ 1.93\) per share yesterday. Dividends will grow over the next five years at the same rate they grew over the last four years. Thereafter, dividends will grow at 7 percent per year. What will Bling Diamond's cash dividend be in seven years?

Price-Earnings Ratio Consider Pacific Energy Company and U.S. Bluechips, Inc., both of which reported earnings of \(\$ 750,000\). Without new projects, both firms will continue to generate earnings of \(\$ 750,000\) in perpetuity. Assume that all earnings are paid as dividends and that both firms require a 14 percent rate of return. 1\. What is the current PE ratio for each company? 2\. Pacific Energy Company has a new project that will generate additional earnings of \(\$ \mathbf{1 0 0 , 0 0 0}\) each year in perpetuity. Calculate the new PE ratio of the company. 3\. U.S. Bluechips has a new project that will increase earnings by \(\$ 200,000\) in perpetuity. Calculate the new PE ratio of the firm.