1. Analysts forecast Best Buy’s growth rate to be 8.50 percent in the future. Their most recent dividend was $2.90. What is the value of Best Buy’s stock when the required return is 12.50 percent? If the current price of Best Buy were $50.25, would you purchase this stock? Why or why not?
2. Assume that you want to buy preferred stock from Ford Motors. If they pay an annual dividend of $3.60 and your required return is 8 percent, what is the most that you would be willing to pay for the stock?