1.

You just calculated a value of $33 for a stock. It is selling in the market for $25. What should you do?

don't buy it

buy it

short sell it

2.

Which factors are the most important in valuing stock?

Mark all that apply

required return

D0

growth rates

Does the stock pay a dividend?

3. Suppose a company is going to grow very, very slowly for the next 2 years: 1% per year. Then it will rise to 7% a year for three years before going to a constant rate of 4%. If D0 was $3.50 and the market requires an 8% rate of return on this stock, what price should it be selling for?

4. Suppose a company is going to grow very, very rapidly for the next 3 years: 150% per year. Then it will drop to 70% a year for three years before going to a constant rate of 4%. At the end of the supernormal growth period, what would be the future price of all the dividends past the supernormal growth period if D0 was $1.00 and we require a 12% rate of return?

5.

Suppose a company is going to grow very, very rapidly for the next 3 years: 150% per year. Then it will drop to 70% a year for three years before going to a constant rate of 4%. Using Supernormal growth valuation techniques, what would be the last dividend you would need to calculate in order to proceed to the next step.

Group of answer choices

D6

D5

D3

D4

D7

6. Suppose a company just paid a dividend of $1.50. It is expected to increase its dividend by 2% per year forever. If the market requires a return of 9% on assets of this risk level, what is the dividend yield? (answer in decimal format and round to the nearest 0.000.)

7. Suppose a company just paid a dividend of $1.50. It is expected to increase its dividend by 2% per year forever. If the market requires a return of 9% on assets of this risk level, what is the capital gain yield? (answer in decimal format and round to the nearest 0.000.)

8. Suppose a company just paid a dividend of $1.50. It is expected to increase its dividend by 2% per year forever. If the market requires a return of 9% on assets of this risk level, how much should the stock be selling for? (round to nearest cent)

9. If a bond pays $40 every year forever and you require 5% to invest in the bond, what is the price you are willing to pay for the bond?

10.The most common form of perpetuity is:

non-constant growth stock

preferred stock

zero coupon bonds