Purpose of Assignment
The purpose of this assignment is to allow students the opportunity to practice stock valuation problems and to locate financial information on the Internet, which can be used to expand their knowledge of how stocks behave.
Resources: Stock Valuation Template
Calculate the following stock valuation problems:
- Company X is paying an annual dividend of $1.35 and has decided to pay the same amount forever. How much should you pay for the stock, if you want to earn an annual rate of return of 9.5% on this investment?
- You want to purchase common stock of Company X and hold it for 7 years. The company just announced they will be paying an annual cash dividend of $6.00 per share for the next 9 years. How much should you pay for the stock, if you will be able to sell the stock for $28 at the end of seven years and you want to earn an annual rate of return of 11% on this investment?
Use attached excel file to calculate the problems and show all the work in a word document as well explaining the steps and the formula used to solve these 2 problems.