Chapter 8

Problems 1-24
Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green NOTE: Some functions used in these spreadsheets may require that the "Analysis ToolPak" or "Solver Add-In" be installed in Excel. To install these, click on the Office button then "Excel Options," "Add-Ins" and select "Go." Check "Analyis ToolPak" and "Solver Add-In," then click "OK."

require that

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Question 1 Input area:

Dividend paid Dividend growth rate Required return # of years

1.95 6% 11% 15

Output area:

Price

99.07

Chapter 8
Question 2 Input area:

Dividend paid Dividend growth rate Stock price

$ $

2.10 5% 48.00

Output area:

Required return

9.38%

Chapter 8
Question 3 Input area:

Dividend paid Dividend growth rate Required return

$ $

2.10 5% 48.00

Output area:

Dividend yield Capital gains yield

4.38% 5.00%

Chapter 8
Question 4 Input area:

Dividend paid Dividend growth rate Required return

3.04 3.80% 11%

Output area:

Price

42.22

Chapter 8
Question 5 Input area:

Dividend growth rate Required return

5.2% 6.3%

Output area:

Required return

11.50%

Chapter 8
Question 6 Input area:

Stock price Required return

47.00 11.0%

Output area:

Next year's dividend Current dividend

$ $

2.59 2.45

Chapter 8
Question 7 Input area:

Current dividend Years until dividend ceases Required return

9.75 11 10.0%

Output area:

Share price

63.33

Chapter 8
Question 8 Input area:

Current dividend Share price

$ $

5.50 108.00

Output area:

Required return

5.09%

Chapter 8
Question 9 Input area:

Dividend paid Dividend growth rate Red required return Yellow required return Blue required return

2.35 5% 8% 11% 14%

Output area:

Red price Yellow price Blue price

$ $ $

78.33 39.17 26.11

Chapter 8
Question 10 Input area:

Dividend paid Dividend growth rate Required return for first 3 years Required return for second 3 years Final required return

3.50 5.0% 14% 12% 10%

Output area:

Stock price at beginning of final period Stock price at beginning of second period Current stock price

98.50 80.81 63.47

Chapter 8
Question 11 Input area:

Future dividend Years until first dividend Dividend growth rate Required return

10.00 10 5% 14%

Output area:

Stock price at constant growth Share price

$ $

111.11 34.17

Chapter 8
Question 12 Input area:

Dividend Dividend growth rate Years of growth Required return

$ $

6.00 4.00 5 11%

Output area:

Year 1 2 3 4 5 6 7 8 9 10 Share price

Dividend 10.00 14.00 18.00 22.00 26.00 63.45

Chapter 8
Question 13 Input area:

Dividend one Dividend two Dividend three Dividend four Dividend growth rate Required return

$ $ $ $

11.00 8.00 5.00 2.00 5% 12%

Output area:

Price after Year 4 dividend Share price

$ $

30.00 40.09

Chapter 8
Question 14 Input area:

Dividend growth rate - period 1 Dividend growth rate - period 2 Required return Dividend

30% 6% 13% 1.80

Output area:

Price at end of supernormal growth Share price

$ $

59.88 48.70

Chapter 8
Question 15 Input area:

Share price Required return Initial dividend growth rate Second growth rate Final growth rate Initial # of years Second # of years

76.00 13% 25% 15% 8% 3 1

Output area:

P4 Share price Current dividend Next year's dividend $ $

48.52 34.79 2.18 2.73

X D0 X D0

Chapter 8
Question 16 Input area:

Dividend paid Dividend growth rate Required return

10.46 -4% 11.50%

Output area:

Price

64.78

Chapter 8
Question 17 Input area:

Stock price Required return Dividend growth rate

64.00 10% 4.50%

Output area:

Current dividend

3.37

Chapter 8
Question 18 Input area:

Current dividend Years until dividend begins Required return

20.00 20 6.4%

Output area:

Share price one year before first dividend $ Share price $

312.50 96.15

Chapter 8
Question 19 Input area:

Dividend yield Dividend paid Change in price P/E ratio Commons shares outstanding

2.10% 1.48 (0.23) 19 25,000,000

Output area:

Today's closing price Yesterday's closing price Earnings per share Net income

$ $ $ $

70.48 70.71 3.71 92,731,830

Chapter 8
Question 20 Input Area:

Dividend per share Initial growth rate Terminal growth rate # of years Required return

1.25 28% 6% 8 13%

Output Area:

Stock price

69.55

Chapter 8
Question 21 Input Area:

Initial growth rate # of years Terminal growth rate Required return Dividend per share

25% 11 6% 12% 1.74

Output Area:

Stock price

142.14

Chapter 8
Question 22 Input area:

Required return Most recent dividend Stock W dividend growth rate Stock X dividend growth rate Stock Y dividend growth rate Stock Z: Initial growth rate Initial # of years Final growth rate

19% 4.50 10% 0% -5%

20% 2 12%

Output area:

Dividend yields: Stock W price Dividend yield Capital gains yield Stock X price Dividend yield Capital gains yield Stock Y price Dividend yield Capital gains yield Stock Z price at final rate Stock Z current price Dividend yield Capital gains yield

55.00 9% 10% 23.68 19% 0% 17.81 24% -5% 103.68 82.33 6.6% 12.4%

$ $

In all cases, the required return is 19%, but this return is distributed

differently between current income and capital gains. High growth stocks have an appreciable capital gains component but a relatively small current income yield; conversely, mature, negativegrowth stocks provide a high current income but also price depreciation over time.

Chapter 8
Question 23 Input area:

Dividend paid Dividend growth rate Required return # of dividends per year

3.20 6% 12% 4

Output area:

a. Price b. Next four dividends Effective quarterly rate Effective first dividend Share price

$ $ $ $

56.53 0.8480 2.87% 3.54 59.02

Chapter 8
Questions 24, 25 Input area:

Required return Most recent dividend Year 1 dividend growth rate Year 2 dividend growth rate Year 3 dividend growth rate Year 4 dividend growth rate

11.00% 2.45 20% 15% 10% 5%

Output area:

Share price after Year 3 dividend Share price

$ $

65.08 55.70

To solve problem #24, adjust the required return until the share price is equal to $63.82. Alternatively, you could use the "Solver" or "Goal Seek" functions.