1) The PRS Corporation's common stock is currently selling for $85, and Value Line estimates its beta to be 1.4. Treasury securities are yielding 4% and the expected market risk premium us 8.5%. PRS paid a dividend of $4 per share last year, and analysts expect the dividend to grow by 22% per year for the next 2 years, than at 16% for 1 year, before settling at a constant rate of 8% over the life of the company. If you are analyzing this stock for possible purchase by your clients, what would recommendations be? Show all of your work.

2) McKenzie, Inc. reported net income of $8.5 million for last year. Depreciation expense totaled $5 million and capital expenditures came to $2 million. Free cash flow is expected to grow at a rate 2.5% for the foreseeable future. McKenzie faces a 40% tax rate and has a 0.50 debt to equity ratio with $20 million (market value) in debt outstanding. McKenzie's equity beta is 1.4, the risk-free rate is currently 5% and the market risk premium us estimated to be 7.5%. McKenzie has 10 million shares of common stock outstanding. What is the current value of a share of McKenzie stock? Show all your work.

3) Use all the information listed below, calculate the intrinsic value of the common stock of PQR Inc. Show all your work

2009 2010 2011 2012 2013 2014

P/E ratio 18 20 22 24 21 22

EPS 1.25 1.50 2.0 2.35 2.10 2.25

CFPS 1.00 1.15 1.50 1.35 1.20 1.45