1.

a. A stock is expected to pay a dividend of $2.25 at the end of the year (i.e., D1 = $2.25), and it should continue to grow at a constant rate of 7% a year. If its required return is 14%, what is the stock's expected price 3 years from today? Round your answer to two decimal places. Do not round your intermediate calculations.

b. Constant growth valuation

Holtzman Clothiers' stock currently sells for $40 a share. It just paid a dividend of $4 a share (i.e., D0 = $4). The dividend is expected to grow at a constant rate of 6% a year.

What stock price is expected 1 year from now? Round your answer to two decimal places. $

What is the required rate of return? Round your answers to two decimal places. Do not round your intermediate calculations. %

c.

After tax salvage value

Karsted Air Services is now in the final year of a project. The equipment originally cost $29 million, of which 85% has been depreciated. Karsted can sell the used equipment today for $7.25 million, and its tax rate is 30%. What is the equipment's after-tax salvage value? Round your answer to the nearest dollar. Write out your answer completely. For example, 13 million should be entered as 13,000,000.