1. A stock is currently selling for $40. The expected dividend is $2. This is a constant growth firm. If investors require a return of 15% on this stock, what do they think the growth rate will be?

2. Calculate the estimated price of the following stock.

Required rate of return: 15%;

Expected dividend next year: $20

Expected constant growth rate of dividends: 10%

3. BLC Industries is expected to pay a dividend of $1.50, and the dividend is expected to grow at a constant rate of 7%. This stock is 15% less risky than the market as a whole. The risk-free rate is 6%, and the equity risk premium for the market is 8%. What is the estimated price of the stock?