1. Suppose that today's stock price is $61.42. If the required rate on equity is 14.6% and the growth rate is 5.4%, compute the expected dividend (i.e. compute D1)
The terms of sale are 1/22, net 40. What is the effective annual rate of interest?
2. ABC’s last dividend paid was $4.86, its required return is 20%, its growth rate is 4%. What is ABC's expected stock price in 11 years?
3. ABC Company's last dividend was $3.6. The dividend growth rate is expected to be constant at 9% for 4 years, after which dividends are expected to grow at a rate of 3% forever. The firm's required return (rs) is 11%. What is its current stock price (i.e. solve for Po)?