1. Stock Valuation: Johnson Brothers earns a 15% book return on equity and has reinvested 40% of earnings. At the end of the year it is expected to pay a $6 dividend. The stock price is $115.00. Now suppose (at t=0) the company has won a major contract that will require heavy investment to finance its expansion. It will have to reinvest 90% of its earnings for the next three years. Starting in year 4, however, it will again be able revert back to the present level of earnings plowback of 40%. What will be the company stock price once this announcement is made? (10 POINTS) 2. Spot Rates: A5% 5-year government bond yields 12% and a 10% 5-year government bond yields 8%. Calculate de 5-year spot rate (rs), assuming annual coupon payments. (5 POINTS)