$12\mathrm{.}2$ Medical Corporation $of$ America $(MCA)$ has a current stock price $of$ $$36,$ and its last dividend $(D0)$ was $$2\mathrm{.}40.In$ view $of$ MCA$s$ strong financial position, its required rate $of$ return $is12$ percent. $If$ MCA$s$ dividends are expected $to$ grow $at$ a constant rate $in$ the future, what $is$ the firm$s$ expected stock price $in$ five years?

$12\mathrm{.}3$ A broker offers $to$ sell you shares $of$ Bay Area Healthcare, which just paid a dividend $of$ $$2$ per share. The dividend $is$ expected $to$ grow $at$ a constant rate $of5$ percent per year. The stock$s$ required rate $of$ return $is12$ percent.

What $is$ the expected dollar dividend over the next three years?

What $is$ the current value $of$ the stock and the expected stock price $at$ the end $of$ each $of$ the next three years?

What $is$ the expected dividend yield and capital gains yield for each $of$ the next three years?

What $is$ the expected total return for each $of$ the next three years?

How does the expected total return compare with the required rate $of$ return $on$ the stock? Does this make sense? Explain your answer.

$12\mathrm{.}4$ Assume the risk$-$free rate $is6$ percent and the market risk premium $is6$ percent. The stock $of$ Physicians Care Network $(PCN)$ has a beta $of1\mathrm{.}5.$ The last dividend paid $byPCN(D0)$ was $$2$ per share.

What would $PCNs$ stock value $beif$ the dividend were expected $to$ grow $at$ a constant:

$-5$ percent?

$0$ percent?

$5$ percent?

$10$ percent?

What would $be$ the stock value $if$ the growth rate were $10$ percent but $PCNs$ beta fell $to$:

$1\mathrm{.}0?$

$0\mathrm{.}5?$

$12\mathrm{.}6$ Jane$s$ sister$-in-$law, a stockbroker $at$ Invest, Inc., $is$ trying $to$ get Jane $to$ buy the stock $of$ Health West, a regional HMO. The stock has a current market price $of$ $$25,$ its last dividend $(D0)$ was $$2\mathrm{.}00,$ and the company$s$ earnings and dividends are expected $to$ increase $at$ a constant growth rate $of10$ percent. The required return $on$ this stock $is20$ percent. From a strict valuation standpoint, should Jane buy the stock?

$12\mathrm{.}7$ Lucas Clinic$s$ last dividend $(D0)$ was $$1\mathrm{.}50.$ Its current equilibrium stock price $is$ $$15\mathrm{.}75,$ and its expected growth rate $is$ a constant $5$ percent. $If$ the stockholders$$ required rate $of$ return $is15$ percent, what $is$ the expected dividend yield and expected capital gains yield for the coming year?