1)

Assume Evco, Inc. has a current stock price of $52.27 and will pay a $1.75 dividend in one year; its equity cost of capital is 15%.

What price must you expect Evco stock to sell for immediately after the firm pays the dividend in one year to justify its current price?

We can expect Evco stock to sell for ....$ (Round to the nearest cent.)

2)

Achi Corp. has preferred stock with an annual dividend of $3.16. If the required return on Achi's preferred stock is 8.4%, what is its price? (Hint: For a preferred stock, the dividend growth rate is zero.)

Achi's stock price will be .......$. (Round to the nearest cent.)