# FIN 534 homework set#3-LATEST!!!(4 QUESTIONS)

Directions: Answer the following questions on this document. Explain how you reached the answer

or

show your work if a mathematical calculation is needed, or both. Submit your assignment using

the

assignment link in the course shell.

This homework assignment is worth 100 points.

Use

the following information for questions 1 through 4:

The

Goodman Industries' and Landry Incorporated's stock prices and dividends,

along with the Market

Index,

are shown below. Stock prices are

reported for December 31 of each year, and dividends reflect

those

paid during the year. The market data

are adjusted to include dividends.

Goodman Industries

Landry Incorporated

Market Index

Year

Stock Price

Dividend

Stock Price

Dividend

Includes

Divi- dends

2013

$25.88

$1.73

$73.13

$4.50

17.49

5.97

2012

22.13

1.59

78.45

4.35

13.17

8.55

2011

24.75

1.50

73.13

4.13

13.01

9.97

2010

16.13

1.43

85.88

3.75

9.65

1.05

2009

17.06

1.35

90.00

3.38

8.40

3.42

2008

11.44

1.28

83.63

3.00

7.05

8.96

1.

Use the data given to calculate the annual returns for Goodman, Landry, and

the Market Index, and

then

calculate average annual returns for the two stocks and the index. (Hint: Remember, returns

are

calculated by subtracting the beginning price from the ending price to get

the capital gain or

loss,

adding the dividend to the capital gain or loss, and then dividing the result

by the beginning

price. Assume that dividends are already included

in the index, Also, you cannot

calculate the

rate

of return for 2008 because you do not have 2007 data.)

2.

Calculate the standard deviations of the returns for Goodman, Landry,

and the Market Index.

(Hint:

Use the sample standard deviation formula given in the chapter, which

corresponds to the

STDEV

function in Excel.)

3. What dividends do you expect for Goodman

Industries stock over the next 3 years if you expect the

dividend

to grow at the rate of 5% per year for the next 3 years? In other words, calculate

D1,

D2, and D3. Note that D0 =

$1.50

4. Assume that Goodman Industries' stock,

currently trading at $27.05, has a required return of 13%.

You

will use this required return rate to discount dividends. Find the present value of the

dividend

stream, that is, calculate the PV of D!, D2, and D3, and then sum these PVs.

You'll get 1 file (13.3KB)