1-

Suppose a firm is expected to increase dividends by 20% in one year and by 15% in two years. After that, dividends will increase at a rate of 5% per year indefinitely. If the next dividend is $1.20 and the required return is 20%, what is the price of the stock? *

a) $ 6.51

b) $ 7.81

c) $ 8.67

d) $ 9.64

e) None of the above

2-

Jora Corp. is expected to pay a $1.2 per share dividend at the end of the year (that is, D1 = $1.2). The dividend is expected to grow at a constant rate of 8% a year. The required rate of return on the stock, rs, is 10%. What is the stocks current value per share? *

a) $10

b) $100

c) $200

d) $700

e) None of the above

3-

Youve just joined LSP whichve offered you two different salary arrangements. The first one is that you can have $95,000 per year for the next two years, however, the second one is that you can have $70,000 per year for the next two years, along with a $45,000 signing bonus today. The bonus is paid immediately, and the salary is paid at the end of each year. If the interest rate is 10 percent, which do you prefer? *

a. The first option

b. The second option

c. Indifferent

d. Neither

e. None of the above