294

lnvestments

10-2

Astra International Tbk. is currently selling for Rp4,500 a share with an expected dividend

in the coming year

of

Rp200 per share.

If the growth

rate

in dividends expected by
in dividends

investors is 9 percent, what is the required rate ofreturn for this stock?

10-3

Sepatu Bata Tbk. is currently selling for Rp5,000 per share and pays Rp300

Investors require 15 percent return on this stock. What is the expected growth rate of
dividends?

10-4

Global Mediacom Tbk. pays Rp150 a year in dividends, which is expected to remain unchanged. Investors require a 15 percent rate of return on this stock. What is the
estimated price?

10-5 a.

Given a preferred stock with an annual dividend of Rp300 per share and a price of
Rp4,000, what is the required rate of return?

b.
10-6

Assume now that interest rates rise, leading investors to demand a required rate

of

return of 9 percent. What will be the new price of this preferred stock? An investor purchase the common stock of a well-known house buildet Mobile-S Telecom Tbk., for Rp2,500 per share. The expected dividend for the next year is Rp300 per sharg and the investor is confident that the stock can be sold one year from now for Rp3,Ofi)What is the implied required rate of return?

10-7 a.

The current risk-free rate (RF) is 10 percen! and the expected return on the market

for the coming year is 15 percent. Calculate the required rate of return for (1) sto& A, with a beta of 1.0, (2) stock B, with a beta of 1.7, and (3) stock C, with a beta of
0.8.

b. c.

How would your answers change if RF in part (a) were to increase to

the other variables unchanged?

12

percent, with

How would your answer change if the expected return on the market changed to 17
percent, with the other variables unchanged?
Resources Tbk. is currently selling for Rp6,000 and is paying a Rp300 dividend12 years,

10-B Inti Agri

a. b.
10-g

Ifinvestor expect dividend to double in

for this stock?

what is the required rate ofreturn

If investor expect dividend to approximately triple in six years, what would be the
required rate of return?

Indah Kiat Pulp & Paper Tbk. is currently selling for Rp3,600, pa),rng Rp180 in dividends
and investors except dividends to grow at a constant rate of8 percent a year.

a. b.

Ifan investor requires

a rate

ofreturn of
a

14 percent

for a stock with the riskiness of

Indah Kiat Pulp & Paper Tbk., is it

good buy for this investor?

What is the maximum an investor with a 14 percent required return should pay for Indah Kiat Pulp & Paper Tbk.? What is the maximum if the required return is 15
percent?

10-10 The Pioneer Dental Supply Company sells at Rp3,200 per share, and Rudi Pioneer, the CEO of this well-known Research Triangle firm, estimates that the latest l2-month earnings are Rp400 per share with a dividend payout of 50 percent. Dr. Parkert earningp
estimates are very accurate.

t. b.

What is Pioneer's current PiE ratio?

If an investor expects earnings to grow by 10 percent a year, what is the projected

price for next year if the P/E ratio remains unchanged?