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."
equire that
Chapter 8
Question 1

Input area:

Dividend paid $ 1.95

Dividend growth rate 6%
Required return 11%
# of years 15

Output area:

Price $ 99.07
Chapter 8
Question 2

Input area:

Dividend paid $ 2.10

Dividend growth rate 5%
Stock price $ 48.00

Output area:

Required return 9.38%

Chapter 8
Question 3

Input area:

Dividend paid $ 2.10

Dividend growth rate 5%
Required return $ 48.00

Output area:

Dividend yield 4.38%

Capital gains yield 5.00%

Chapter 8
Question 4

Input area:

Dividend paid $ 3.04

Dividend growth rate 3.80%
Required return 11%

Output area:

Price $ 42.22
Chapter 8
Question 5

Input area:

Dividend growth rate 5.2%

Required return 6.3%

Output area:

Required return 11.50%

Chapter 8
Question 6

Input area:

Stock price $ 47.00

Required return 11.0%

Output area:

Next year's dividend $ 2.59

Current dividend $ 2.45

Chapter 8
Question 7

Input area:

Current dividend $ 9.75

Years until dividend ceases 11
Required return 10.0%

Output area:

Share price $ 63.33

Chapter 8
Question 8

Input area:

Current dividend $ 5.50

Share price $ 108.00

Output area:

Required return 5.09%

Chapter 8
Question 9

Input area:

Dividend paid $ 2.35

Dividend growth rate 5%
Red required return 8%
Yellow required return 11%
Blue required return 14%

Output area:

Red price $ 78.33

Yellow price $ 39.17
Blue price $ 26.11
Chapter 8
Question 10

Input area:

Dividend paid $ 3.50

Dividend growth rate 5.0%

Required return for first 3 years 14%

Required return for second 3 years 12%
Final required return 10%

Output area:

Stock price at beginning of final period $ 98.50

Stock price at beginning of second period 80.81

Current stock price $ 63.47

Chapter 8
Question 11

Input area:

Future dividend $ 10.00

Years until first dividend 10
Dividend growth rate 5%
Required return 14%

Output area:

Stock price at constant growth $ 111.11

Share price $ 34.17

Chapter 8
Question 12

Input area:

Dividend $ 6.00
Dividend growth rate $ 4.00
Years of growth 5
Required return 11%

Output area:

Year Dividend
1 $ 10.00
2 14.00
3 18.00
4 22.00
5 26.00
6 -
7 -
8 -
9 -
10 -

Share price $ 63.45

Chapter 8
Question 13

Input area:

Dividend one $ 11.00

Dividend two $ 8.00
Dividend three $ 5.00
Dividend four $ 2.00
Dividend growth rate 5%
Required return 12%

Output area:

Price after Year 4 dividend $ 30.00

Share price $ 40.09

Chapter 8
Question 14

Input area:

Dividend growth rate - period 1 30%

Dividend growth rate - period 2 6%
Required return 13%
Dividend $ 1.80

Output area:

Price at end of supernormal growth $ 59.88

Share price $ 48.70

Chapter 8
Question 15

Input area:

Share price $ 76.00

Required return 13%

Initial dividend growth rate 25%

Second growth rate 15%
Final growth rate 8%

Initial # of years 3
Second # of years 1

Output area:

P4 48.52 X D0

Share price 34.79 X D0

Current dividend $ 2.18

Next year's dividend $ 2.73

Chapter 8
Question 16

Input area:

Dividend paid $ 10.46

Dividend growth rate -4%
Required return 11.50%

Output area:

Price $ 64.78
Chapter 8
Question 17

Input area:

Stock price $ 64.00

Required return 10%
Dividend growth rate 4.50%

Output area:

Current dividend $ 3.37

Chapter 8
Question 18

Input area:

Current dividend $ 20.00

Years until dividend begins 20
Required return 6.4%

Output area:

Share price one year before

first dividend $ 312.50

Share price $ 96.15

Chapter 8
Question 19

Input area:

Dividend yield 2.10%

Dividend paid $ 1.48
Change in price (0.23)
P/E ratio 19
Commons shares outstanding 25,000,000

Output area:

Today's closing price $ 70.48

Yesterday's closing price $ 70.71

Earnings per share $ 3.71

Net income $ 92,731,830

Chapter 8
Question 20

Input Area:

Dividend per share $ 1.25

Initial growth rate 28%
Terminal growth rate 6%
# of years 8
Required return 13%

Output Area:

Stock price $ 69.55

Chapter 8
Question 21

Input Area:

Initial growth rate 25%

# of years 11
Terminal growth rate 6%
Required return 12%
Dividend per share $ 1.74

Output Area:

Stock price $ 142.14

Chapter 8
Question 22

Input area:

Required return 19%

Most recent dividend $ 4.50

Stock W dividend growth rate 10%

Stock X dividend growth rate 0%
Stock Y dividend growth rate -5%

Stock Z:
Initial growth rate 20%
Initial # of years 2
Final growth rate 12%

Output area:

Dividend yields:
Stock W price $ 55.00
Dividend yield 9%
Capital gains yield 10%

Stock X price $ 23.68

Dividend yield 19%
Capital gains yield 0%

Stock Y price $ 17.81

Dividend yield 24%
Capital gains yield -5%

Stock Z price at final rate $ 103.68

Stock Z current price $ 82.33
Dividend yield 6.6%
Capital gains yield 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, negative-
growth stocks provide a high current income but also price
depreciation over time.
 Chapter 8
Question 23

Input area:

Dividend paid $ 3.20

Dividend growth rate 6%
Required return 12%

# of dividends per year 4

Output area:

a. Price $ 56.53

b. Next four dividends $ 0.8480

Effective quarterly rate 2.87%
Effective first dividend $ 3.54

Share price $ 59.02

Chapter 8
Questions 24, 25

Input area:

Required return 11.00%

Most recent dividend $ 2.45

Year 1 dividend growth rate 20%

Year 2 dividend growth rate 15%
Year 3 dividend growth rate 10%
Year 4 dividend growth rate 5%

Output area:

Share price after Year 3

dividend $ 65.08

Share price $ 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.