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1) Summit Systems will pay a dividend of $1.69 this year. If you expect Summit's dividend to grow by 5.8% per year, what is its price per share if
1) Summit Systems will pay a dividend of $1.69 this year. If you expect Summit's dividend to grow by 5.8% per year, what is its price per share if the firm's equity cost of capital is 10.5 %?
2) Cooperton Mining just announced it will cut its dividend from $3.88 to $2.63 per share and use the extra funds to expand. Prior to the announcement, Cooperton's dividends were expected to grow at a 3.4% rate, and its share price was $51.91.With the planned expansion, Cooperton's dividends are expected to grow at a 4.5% rate. What share price would you expect after the announcement? (Assume that the new expansion does not change Cooperton's risk.) Is the expansion a good investment?
3) CX Enterprises has the following expected dividends: $1.02 in one year, $1.21 in two years, and $1.34in three years. After that, its dividends are expected to grow at 3.8%per year forever (so that year 4's dividend will be 3.8% more than $1.34 and so on). If CX's equity cost of capital is 12.3% , what is the current price of its stock?
