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.
 

 
 
 
 
 
 

 


 
 
 
 
 
 

 
 
 
 
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