1. If a stocks dividend is expected to grow at a constant rate of 5% a year, which of the following statements is CORRECT? The stock is in equilibrium. 1 pts

a. The expected return on the stock is 5% a year.

b. The stocks dividend yield is 5%.

c. The price of the stock is expected to decline in the future.

d. The stocks required return must be equal to or less than 5%.

e. The stocks price one year from now is expected to be 5% above the current price.

2. GM is expected to pay a $3.00 per-share dividend at the end of the year (D₁ = $3.00). The stock sells for $150 per share and its required rate of return is 14 percent. The dividend is expected to grow at a constant rate, g, forever. What is the growth rate, g, for this stock? 1 pts

3. A stock is expected to pay a year-end dividend of $2.00 a share (D₁ = $2.00). The dividend is

expected to decline at a rate of 5% a year constantly (g = -5%). The companys expected and

required rate of return is 15%. Which of the following statements is CORRECT? 1 pts

a. The companys current stock price is $20.

b. The companys dividend yield 5 years from now is expected to be 10%.

c. The companys stock price next year is expected to be $9.50.

d. The companys expected capital gains yield is 15%.

e. The constant growth model cannot be used because the growth rate is negative.

4. LCDs stock just paid dividend of $5.00 (D₀). The dividend is expected to grow at a constant rate of 8 percent per year, and the stocks required rate of return is 12 percent. Given this information, what is the expected price of the stock, eight years from now? 1 pts

a. $200.00

b. $185.09

c. $99.95

d. $249.87

e. $150.00

5. Keys Inc's stock has a required rate of return of 10%, and it sells for $50 per share. Keys' dividend is expected to grow at a constant rate of 7% per year. What was Keys' last dividend, D₀? 1 pts

6. Apples most recent dividend was $2.50 per share (D₀ = $2.50). The dividend is expected to grow at a rate of 10 percent per year. The risk-free rate is 5 percent and the market rate of return is 10 percent (r_M). If the companys beta is 1.3, what is the price of the stock today? 2 pts

7. Your company paid a dividend of $3.00 last year (D₀ =3.0). The growth rate is expected to be 9 percent for first year, 8 percent the second year, then 7 percent for the third year, and then the growth rate is expected to be a constant 6 percent thereafter. The required rate of return on equity (r_s) is 10 percent. What is the companys current stock price (i.e., intrinsic value)? 3 pts

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