1. A stock paid $2.25 in dividends at the end of last year and is expected to pay a cash dividend until infinity. No growth is expected. Investors require a 5.5% rate of return. What is the value of the common stock?
2.25
3.75
37.5
39.75
2. If a firm pays a constant dividend of $3.45 a share and investors require a 12% return, what is the value of the firm's stock?
$12.45
$345.00
$28.75
$34.50