262 Chapter 6 Investments
- The stock of Big L Corporation sold for $15.35 per share 2 years ago. Today, it sells for $0.14 per share. There have
been no stock splits. Find the compound annual growth rate which this represents. - Waterdown’s Will Micro-Breweries stock sells for $27.95 per share. The company is currently paying 12.5 cents per
share in quarterly dividends. Over the last 12 months, the company has paid dividends totaling 42.5 cents per share.
Calculate the current dividend yield and the trailing dividend yield. - Five years ago, I invested $10,000 in my nephew’s landscape business. The business fared poorly, and now he is closing
it down. I will receive $2,500 for my share of the company. Without considering any dividends that may have been paid,
what compound annual growth rate did I earn on this investment? - CombinaTaco Restaurants pays a 34.5 cents per share quarterly dividend. The stock sells for $48.66 per share. What is
the current dividend yield? - Tastee Lard Donut Shoppes earned $498,000 last quarter, and the board of directors has determined that $275,000
should be paid out as a dividend to the shareholders. The company has 846,832 shares issued.
a. Calculate the dividend rate per share. Round your answer to the nearest tenth of a cent.
b. Find the dividend that would be paid to the owner of 475 shares.- Suppose you invested $5,000 in a stock, and 4 years later it is worth $8,500. The stock paid no dividends. What CAGR
does this represent? - Edith invested $1,600 in her local electric company’s dividend reinvestment plan 8 years ago. She has made no
additional investments, nor has she withdrawn any money from the plan. Right now, her account is worth $2,849.15.
What is the total rate of return she has earned from this investment? - On the basis of its profi ts last quarter, a small computer software company will pay out $27,345 to its shareholders. The
company has 3,500 shares of stock, and Rashan owns 850 shares. How much will he receive?
H. Additional Exercises
- A stock pays a $0.57 per share quarterly dividend, and has a 2.48% current dividend yield. What is the stock’s price per
share? - a. Three years ago, Cipherbound Systems stock sold for $45 a share. Things have not gone well for the company, and
the stock is now worthless. What is the compound annual growth rate for this investment?
b. Rework this problem assuming that the time is 10 years instead of 3. - Seven years ago, Dwayne bought stock in Barrytronic Corporation for $73.50 per share. The stock has split 2 for 1 three
times in those 7 years. The stock price is now $34.79 per share. What CAGR has Dwayne earned on this investment?