1. You are considering the purchase of a share of stock. In the most recently reported fiscal year Earnings per Share (EPS) were $1.85. You expect earnings to grow at 0.80% per year into the future, and you require a return of 6.50% on the investment. Using a Gordon Growth Model, what is a reasonable estimate for the share price?
2. One year ago you purchased a share of stock for $15.44. Today it is selling for $14.62. What is the Holding Period Return on this investment for the year? What would be the Holding Period Return if the firm had paid a dividend of $1.60 per share during the year?