1) A company currently pays a dividend of $3 25 per share, D0 3 25 It is estimated that the company's dividend will grow at a rate of 23 percent per year for the next 2 years, then the dividend will grow at a constant rate of 8 thereafter The company's stock has a beta equal to 1 25, the risk free rate is 8 percent, and the market risk premium is 3 percent What is your estimate is the stock's current price Round your answer to the nearest cent 2) The risk free rate of return, r RF , is 11 the required rate of return on the market, r M , 15 and Schuler Company's stock has a beta coefficient of 1 8 If the dividend expected during the coming year, D 1 , is $2 00, and if g is a constant 3 , then at what price should Schuler's stock sell Round your answer to the nearest cent $ Now, suppose the Federal Reserve Board increases the money supply, causing a fall in the risk free rate to 5 and r M to 13 How would this affect the price of the stock Round your answer to the nearest cent $ In addition to the change in part b, suppose investors' risk aversion declines this fact, combined with the decline in r RF , causes r M to fall to 8 At what price would Schuler's stock sell Round your answer to the nearest cent $ Suppose Schuler has a change in management The new group institutes policies that increase the expected constant growth rate to 6 Also, the new management stabilizes sales and profits, and thus causes the beta coefficient to decline from 1 8 to 0 6 Assume that r RF and r M are equal to the values in part c After all these changes, what is Schuler's new equilibrium price ( Note D 1 goes to $2 06 ) Round your answer to the nearest cent $ 3) Investors require a 15 rate of return on Brooks Sisters' stock (r s 15 ) What would the value of Brooks's stock be if the previous dividend was D 0 $1 and if investors expect dividends to grow at a constant compound annual rate of (1) 2 , (2) 0 , (3) 2 , or (4) 14 Round your answers to the nearest cent $ $ $ $

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1) A company currently pays a dividend of $3.25 per share, D0 = 3.25. It is estimated that the company's dividend will grow at a

1) A company currently pays a dividend of $3.25 per share, D0 = 3.25. It is estimated that the company's dividend will grow at a rate of 23% percent per year for the next 2 years, then the dividend will grow at a constant rate of 8% thereafter. The company's stock has a beta equal to 1.25, the risk-free rate is 8 percent, and the market risk premium is 3 percent. What is your estimate is the stock's current price? Round your answer to the nearest cent.

2) The risk-free rate of return, rRF , is 11%; the required rate of return on the market, rM, 15%; and Schuler Company's stock has a beta coefficient of 1.8.

If the dividend expected during the coming year, D1, is $2.00, and if g is a constant 3%, then at what price should Schuler's stock sell? Round your answer to the nearest cent. $
Now, suppose the Federal Reserve Board increases the money supply, causing a fall in the risk-free rate to 5% and rM to 13%. How would this affect the price of the stock? Round your answer to the nearest cent. $
In addition to the change in part b, suppose investors' risk aversion declines; this fact, combined with the decline in rRF, causes rM to fall to 8%. At what price would Schuler's stock sell? Round your answer to the nearest cent. $
Suppose Schuler has a change in management. The new group institutes policies that increase the expected constant growth rate to 6%. Also, the new management stabilizes sales and profits, and thus causes the beta coefficient to decline from 1.8 to 0.6. Assume that rRF and rM are equal to the values in part c. After all these changes, what is Schuler's new equilibrium price? (Note: D1 goes to $2.06.) Round your answer to the nearest cent. $

3) Investors require a 15% rate of return on Brooks Sisters' stock (rs = 15%).

What would the value of Brooks's stock be if the previous dividend was D0 = $1 and if investors expect dividends to grow at a constant compound annual rate of (1) - 2%, (2) 0%, (3) 2%, or (4) 14%? Round your answers to the nearest cent.
1. $
2. $
3. $
4. $