1. A share of stock just reported earnings of $3 and had just paid a dividend of $2. future dividends are expected to grow at a rate of 4%. If the price is $26, what is the cost of capital for the stock?
2. What are two different ways to eliminate the cost of equity for a firm?
3. A share of stock is expected to pay a dividend of $1 in one year, and $1.50 in two years. After that, its dividends are expected to grow at a rate of 5% per year forever. If the expected rate of return on the stock is 8%, what is the current price per share?