Bob Katz is interested in the following stock: – current dividend is $3.00 – projected three year growth rate of 11% – growth rate after year 3 is expected to fall and remain constant at 6% – Bob’s required return is 12%   Step 1: Present value of Dividends t Do FVIF Dt PVIF PVdiv 1 2 3   Step 2: Future value of stock price     Step 3: Present value of future stock price    Step 4: Present value of stock    Solving for step 4, what would Bob Katz be willing to pay (approximately) for the stock?

Beginning in 10 years, (end of years 10 to 12) you will receive 3 annual installments of $70,000 each. If interest rates are 8%, what are these benefits worth to you today?

Jay Aquire is considering the purchase of the following: a Builtrite, $1000 par, 6 7/8% coupon rate, 15 year maturity bond which is currently selling for $1060. If Jay purchases the bond, what would his approximate yield-to-maturity be?

Owners of preferred stock

What is the value of a $100 par value preferred stock with a 3.0% coupon if investors require a 5% return?

Builtrite stock is currently selling for $48 and recently paid a dividendof $2.00. The stock has a projected constant growth rate of 10%. If youpurchase this stock, what is your expected rate of return?

What is the value of a $100 par value preferred stock with a 3.0% coupon if investors require a 10% return?

Jack Rabbit has saved $10,000 annually for the last 35 years in an account earning 6%. If Jack estimates that he will live for an additional 25 years, how much would he be able to start withdrawing annually for his retirement (6% interest)?

What annual return would you be earning if you were able to purchase a $1000 par, zero coupon bond for $544 that had 9 years until maturity?

What annual return would you be earning if you were able to purchase a $1000 par, zero coupon bond for $475 that had 11 years until maturity?