Question 1: Hahn Manufacturing is predicted to pay a dividend of $1.00 per share at the end of the year (D1 = $1.00). The stock sells for $40 per share and its required rate of return is 11%. The dividend is predicted to grow at a constant rate, g, forever. Determine the Hahn's expected growth rate?
a) 8.00%
b) 8.50%
c) 9.00%
d) 9.50%
e) 10.00%
Question 2: P. Daves Inc's stock is presently sells for $45 per share. The stock's dividend is projected to rise at a constant rate of 4% per year. The required rate of return on the stock, rs, is 12%. Find out Dave’s expected price 6 years from now?
a) $52.68
b) $53.71
c) $54.41
d) $55.12
e) $56.94
Question 3: The Lashgari Company is expected to pay a dividend of $1 per share at the end of the year and that dividend is expected to grow at a constant rate of 5% per year in the future. The company's beta is around 1.2, the market risk premium is 5% and the risk-free rate is 3%. Determine company's present stock price?
a) $15.00
b) $20.00
c) $25.00
d) $30.00
e) $35.00
Question 4: Mack Industries just paid a dividend of $1.00 per share (D0 = $1.00). Analysts predict the company's dividend to grow 20% this year (D1 = $1.20) and 15% next year. After two years the dividend is expected to grow at a steady rate of 5%. The required rate of return on the company's stock is 12%. What must be the company's current stock price?
a) $12.33
b) $16.65
c) $16.91
d) $18.67
e) $19.67
Question 5: Klieman Company's perpetual preferred stock sells for $90 per share and pays a $7.50 annual dividend per share. If the company were to sell a new preferred issue, it would acquire a flotation cost of 5.00% of the price paid by investors. Determine the company's cost of preferred stock?
a) 7.50%
b) 7.79%
c) 8.21%
d) 8.57%
e) 8.77%