1.)

Red, Inc., Yellow Corp., and Blue Company each will pay a dividend of $2.86 next year. The growth rate in dividends for all three companies is 5%. The required rate of return for each company's stock is 8%, 11% and 14%, respectively. What is the stock price for each company? What do you conclude about the relationship between the required return and stock price?

Use the constant dividend growth model , which is: Pt = Dt(1 + g)/(R g)
Red Inc. Stock Price:
Yellow Corp. Stock Price:
Blue Company Stock Price:

What do you conclude about the relationship between the required return and stock price?

2.)

Suppose a company currently pays an annual dividend of $2.96 on its common stock in a single installment, and management plans on raising this dividend by 4% per year indefinitely. If the required rate of return on this stock is 11%, what is the current share price?
					Use the constant dividend growth model , which is: Pt = Dt(1 + g)/(R g)
Stock price is = 3.) The next dividend payment by Grenier, Inc. will be $2.14 per share next year. The dividends are anticipated to maintain a growth rate of 4.4% forever. If the stock currently sells for $32 per share, what is the required return?