1. Best Value Outlet recently announced that it intends to pay dividends of $0.40, $0.60, $0.75, and $1.00 per share over the next four years, respectively. After that, the plan is to increase the dividend by 3.5 percent annually. What is the current value of this stock if the applicable discount rate is 13.5 percent?
A. $6.44
B. $7.83
C. $8.17
D. $9.55
E. $13.10
2. Quality Home Made Ice Cream has plans to pay decreasing annual dividends of $1.50, $1.25, and $1.00 over the next three years, respectively. After that, the firm will increase the dividend by 4 percent each year. What is the value of this stock today at a discount rate of 9 percent?
A. $19.26
B. $19.54
C. $19.69
D. $19.93
E. $20.48
3. Electronics Galore has historically had a P/E ratio of 23.4. This ratio is considered a good estimate of the future ratio. The firm currently has EPS of $1.68. These earnings are expected to increase by 4.2 percent next year. What is the expected price of this stock one year from now?
A. $39.31
B. $40.96
C. $41.25
D. $42.78
E. $43.79
4. Historically, Jones Trucking has had a P/E ratio of 14.6. The firm has current net income of $92,000 with 85,000 shares of stock outstanding. The EPS growth rate is 4.5 percent. What is the expected price of this stock one year from now?
A. $15.32
B. $15.85
C. $16.41
D. $16.51
E. $17.10
5. The Satellite Shoppe has current sales per share of $8.40. The sales per share are expected to increase at an annual rate of 12 percent. The historical P/E ratio is 16.2 and the historical P/S ratio is 7.6. What is the expected price of this stock one year from now?
A. $59.72
B. $66.67
C. $71.50
D. $115.18
E. $129.00