1. Assume Highline Company has just paid an annual dividend of

$0.95.

Analysts are predicting an

11.8%

per year growth rate in earnings over the next five years. After then, Highline's earnings are expected to grow at the current industry average of

5.4%

per year. If Highline's equity cost of capital is

7.7%

per year and its dividend payout ratio remains constant, for what price does the dividend-discount model predict Highline stock should sell?

The value of Highline's stock is

$nothing.

(Round to the nearest cent.)

2. Zoom Enterprises expects that one year from now it will pay a total dividend of

$5.2

million and repurchase

$5.2

million worth of shares. It plans to spend

$10.4

million on dividends and repurchases every year after that forever, although it may not always be an even split between dividends and repurchases. If Zoom's equity cost of capital is

12.9%

and it has

5.3

million shares outstanding, what is its share price today?

The price per share is

$nothing.

(Round to the nearest cent.)

3. Laurel Enterprises expects earnings next year of

$3.72

per share and has a

50%

retention rate, which it plans to keep constant. Its equity cost of capital is

9%,

which is also its expected return on new investment. Its earnings are expected to grow forever at a rate of

4.5%

per year. If its next dividend is due in one year, what do you estimate the firm's current stock price to be?

The current stock price will be

$nothing.

(Round to the nearest cent.)