1. Company Y does not plow back any earnings and is expected to produce a level dividend stream of $5 a share. If the current stock price is $40, what is the market capitalization rate?(Enter your answer as a percent rounded to 1 decimal place.)

Market capitalization rate = ?

2.Company Z-primes earnings and dividends per share are expected to grow by 5% a year. Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. Assume next years dividend is $10, the market capitalization rate is 8% andnext years EPS is $15. What is Z-primes stock price?

stock price= ?

3..Pharmecology just paid an annual dividend of $1.35 per share. Its a mature company, but future EPS and dividends are expected to grow with inflation, which is forecasted at 2.75% per year. The nominal cost of capital is 9.5%.

What is Pharmecologys current stock price?

What would be Pharmecologys current stock price using forecasted real dividends and a real discount rate?

4.

Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made in 2016 are as follows:

($ millions)	2017	2018	2019	2020	2021
Net income	1.0	2.0	3.2	3.7	4.0
Investment	1.0	1.0	1.2	1.4	1.4
Free cash flow	0	1.0	2.0	2.3	2.6

Phoenixs recovery will be complete by 2021, and there will be no further growth in free cash flow.

a=Calculate the PV of free cash flow, assuming a cost of equity of 9%.

b=Assume that Phoenix has 12 million shares outstanding. What is the price per share?

c=If the net income for 2016 is $1 million, what is Phoenixs P/E ratio?