1. A company’s preferred stock pays a fixed dividend of $1.4 per share forever. The market uses a discount rate of 7%. What is the price of this preferred stock? Answer: $______________
2. A company will pay a dividend of $0.90 next year and the dividend is expected to grow at a constant rate of 3% forever. The market is expected to use a discount rate of 10% to value the stock. What is the price of the stock? Answer: $______________
3. The market price of a stock is $15.50 and it is expected to pay a $1.20 dividend next year. The dividend is expected to grow at 3% forever. What is the required rate of return for the stock? Answer: ______________%
4. A firm just paid a dividend of $1.40. The dividend is expected to grow at a constant rate of 4% forever and the required rate of return is 15%. What is the value of the stock? Answer: $______________
5. Partial Credits) A firm just paid a dividend of $2. The dividend is expected to grow at 25% for next two years and then grow at 2% thereafter. The required rate of return on the stock is 11%. What is the value of the stock? The amount of dividend at t = 3 is $______________ What is the value of the stock today? Answer: $______________
6. The risk free rate in the economy is 1.00% and the market risk premium is 5.00%. If an analyst estimates that a company’s β (beta) is 0.9, what is the expected return on the company’s stock? Answer: ______________%