1. Combined Communications is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 21 percent a year for the next 4 years and then decreasing the growth rate to 6 percent per year. The company just paid its annual dividend in the amount of $1.20 per share. What is the current value of one share of this stock if the required rate of return is 9.50 percent?
$59.50
$65.18
$52.25
$60.39
$56.20
2. Miller Brothers Hardware paid an annual dividend of $1.45 per share last month. Today, the company announced that future dividends will be increasing by 2.80 percent annually. If you require a 8.8 percent rate of return, how much are you willing to pay to purchase one share of this stock today?
$51.79
$23.39
$26.29
$53.24
$24.84