1. Ms. Manners Catering (MMC) has paid a constant $1.50 per share dividend to its common stockholders for the past 25 years. MMC expects to continue this policy for the next two years, and then begin to increase the dividend at a constant rate equal to 2 percent per year into perpetuity. Investors require a 12 percent rate of return to purchase MMC's common stock. What is the market value of MMC's common stock? Please show work.
A 14.73
B 15.30
C 15.58
D 15.00
E 12.20
2. The last dividend on Spirex Corporation's common stock was $4.00, and the expected growth rate is 10 percent. If you require a rate of return of 20 percent, what is the highest price you should be willing to pay for this stock? PLease show work.
A 38.50
B 40.00
C 45.69
D 50.00
E 44.00