1)

i. Laurel Enterprises expects earnings next year of $3.94 per share and has a 50 % retentionrate, which it plans to keep constant. Its equity cost of capital is 11 %, which is also its expected return on new investment. Its earnings are expected to grow forever at a rate of 5.5 % per year. If its next dividend is due in oneyear, what do you estimate thefirm's current stock price tobe?

ii) Assume Gillette Corporation will pay an annual dividend of $ 0.61 one year from now. Analysts expect this dividend to grow at 11.7 % per year thereafter until the 6th year.Thereafter, growth will level off at 2.3 % per year. According to thedividend-discount model, what is the value of a share of Gillette stock if thefirm's equity cost of capital is 8.3%?

iii) Assume Coleco pays an annual dividend of $ 1.54 and has a share price of $ 37.91. It announces that its annual dividend will increase to $ 1.74 If its dividend yield stays thesame, what should be its new shareprice?

iv) Krell Industries has a share price of $ 22.15 today. If Krell is expected to pay a dividend of $ 0.95 this year and its stock price is expected to grow to $ 23.45 at the end of theyear, what isKrell's dividend yield and equity cost ofcapital?

a) The dividend yield is _____ %. ? (one decimal place)

b) The capital gain rate is _____%. ? (one decimal place)

c) The total return is ______ %? (one decimal place)

v. Assume Highline Company has just paid an annual dividend of $1.02. Analysts are predicting an 11.9 % per year growth rate in earnings over the next five years. Afterthen, Highline's earnings are expected to grow at the current industry average of 5.6 % per year. IfHighline's equity cost of capital is 7.7 % per year and its dividend payout ratio remainsconstant, for what price does thedividend-discount model predict Highline stock shouldsell?