1. Beta Utilities Inc. expects a constant growth rate of 2% in its dividend payments. If the company expects to pay a dividend of $5 per share in one year’s time, and its current share price is $60, what is the required rate of return on Beta’s shares?

Select one:

a. 8.33%

b. 10.33%

c. 10.50%

d. 14.00%

e. 28.33%

2. Cobra Banking Group issued preferred shares 10 years ago with a stated value of $95, and a dividend yield of 7%. What is the current price of each preferred share if the required return today is 15%?

Select one:

a. $5.95

b. $44.33

c. $74.38

d. $79.58

e. $85.00

3. Which of the following is a disadvantage of using the Dividend Growth Model to price shares?

Select one:

a. It is difficult to use and understand.

b. It does not take into account the time value of money.

c. It cannot be used to analyze components of required return.

d. It cannot be used to value companies that do not currently pay dividends.

e. Its accuracy depends on the accuracy of its estimated variables.