1. The Canning Company has been hard hit by increased competition. Analysts predict that earnings (and dividends) will decline at a rate of 5 percent annually into the foreseeable future. If Canning's last dividend (D0) was $2.00, and investors' required rate of return is 17 percent, what will be Canning's stock price in 3 years?
A. a. $8.45
B. b. $7.41
C. c. $10.66
D. d. $6.52
E. e. $4.12
2. Johnson Corporation's stock is currently selling at $38.93 per share. The last dividend paid (D0) was $2.50. Johnson is a constant growth firm. If investors require a return of 16 percent on Johnson's stock, what do they think Johnson's growth rate will be?
A. a. 9%
B. b. 10%
C. c. 7%
D. d. 8%
E. e. 6%