Stock Valuation

In this challenge, students will focus on stock valuation.

Tasks 1–4 will help build a basic understanding of stock valuation equations by calculating the stock value or the stock’s required rate of return.

For Tasks 5–7, students will calculate the value of a stock that will start paying a dividend of $2.15 in 10 years from today. The dividend is expected to grow at a rate of 5%. The required rate of return is 8%. Assume that there will be no dividend paid until $2.15 is paid in 10 years.

Tasks 8–12 involve valuing a stock that just paid a dividend of $1.30 per share. The dividend is expected to grow at a rate of 15% for the first four years and then at a rate of 7% thereafter. The required rate of return on this stock is 10%.

Task 13 involves valuing a stock that just paid a dividend of $1.63 with a growth rate of 3% and required rate of return of 8%.