1. Investors require a return of 12.5% per year to hold a stock. The stock’s next dividend is expected to be $1.58 per share and the dividends are expected to grow forever at a constant rate of 4.8% per year. What is the stock’s intrinsic value per share?
1) $20.52
2) $19.37
3) $18.67
4) $17.62
5) $21.50
2. A company’s stock price currently is $86.31 per share. If the company’s dividend yield is 7.1% per year and the dividends are expected to grow forever at a constant rate of 5.1% per year, what is the stock’s annual required return?
1) 12.2%
2) 10.5%
3) 12.8%
4) 11.7%
5) 13.3%