1. Assume that the average firm in your company's industry is expected to grow at a constant rate of 5% and that its dividend yield is 7%. Your company is about as risky as the average firm in the industry, but it has just successfully completed some R&D work that leads you to expect that its earnings and dividends will grow at a rate of 50% [D1 = D0(1 + g) = D0(1.50)] this year and 20% the following year, after which growth should return to the 5% industry average. If the last dividend paid (D0) was $1.75, what is the value per share of your firm's stock? Round your answer to the nearest cent. Do not round your intermediate computations.

2. Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.00 coming 3 years from today. The dividend should grow rapidly - at a rate of 80% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 6% per year. If the required return on the stock is 17%, what is the value of the stock today (assume the market is in equilibrium with the required return equal to the expected return)? Round your answer to the nearest cent. Do not round your intermediate computations.

3.

Several years ago, Rolen Riders issued preferred stock with a stated annual dividend of 11% of its $100 par value. Preferred stock of this type currently yields 9%. Assume dividends are paid annually.

a.What is the value of Rolen's preferred stock? Round your answer to the nearest cent. $

b.Suppose interest rate levels have risen to the point where the preferred stock now yields 14%. What would be the new value of Rolen's preferred stock? Round your answer to the nearest cent. $

4.

You buy a share of The Ludwig Corporation stock for $21.30. You expect it to pay dividends of $1.10, $1.15, and $1.2023 in Years 1, 2, and 3, respectively, and you expect to sell it at a price of $27.48 at the end of 3 years.

a.Calculate the growth rate in dividends. Round your answer to two decimal places. %

b.Calculate the expected dividend yield. Round your answer to two decimal places. %

c.Assuming that the calculated growth rate is expected to continue, you can add the dividend yield to the expected growth rate to obtain the expected total rate of return. What is this stock's expected total rate of return? Round your answer to two decimal places. %

5.

Investors require a 17% rate of return on Brooks Sisters' stock (rs = 17%).

1. What would the value of Brooks's stock be if the previous dividend was D0 = $1.25 and if investors expect dividends to grow at a constant compound annual rate of (1) - 3%, (2) 0%, (3) 4%, or (4) 10%? Round your answers to the nearest cent.
   1. $
   2. $
   3. $
   4. $