10. If a stock is expected to pay a dividend of $2 during the next 12 months, and its current price is $10, then its expected dividend yield is (4 Points)

11. If the stock sells for $11 today, and it is expected to rise to $12 at the end of the year, then the expected capital gain is (4 Points)

12. If Minnesota Health Systems, just paid a dividend of $2.92 and if investors expect a 15% constant dividend growth rate, the dividend expected in one year will be? (4 Points)

13. If Minnesota Health Systems, just paid a dividend of $2.92 and if investors expect a 15% constant dividend growth rate, the dividend expected in five years will be? (4 Points)

14. Calculate the value of the stock in a constant growth model, if (5 Points) Last Dividend paid, D 0 = $2.82 Expected constant dividend growth rate, E(g) = 12% Stocks required rate of return, R(Re) = 14%

15. Assume the next expected dividend is $0.60, the constant dividend growth rate is 3.0 percent, and the required rate of return on the stock is 10 percent. What is the stocks value? (5 Points)

16. Calculate the Expected Rate of Return of the stock: (5 Points) If P 0 = $30 E(D 1 ) = $3.00 E(g) = 12%

17. If the dividend yield in a stock is 10% and the capital gains yield is 12.5%. What is the total return on the stock? (2 Points)

18. Medical corporation of America (MCA) has a current stock price of $36, and its last dividend (D0) was $2.40. In view of MCAs strong financial position, its required rate of return is 12%. If MCAs dividend are expected to grow at a constant rate in the future, what is the firms expected stock price in five years? (7 Points)

19. Better Life Nursing Home, Inc, has maintained a dividend payment of $4 per share for many years. The same dollar dividend is expected to be paid in future years. If investors require a 12 percent rate of return on investments of similar risk, determine the value of the companys stock. (5 Points)

20. Janes sister-in-law, a stockbroker at Invest, Inc is trying to get Jane to buy the stock of HealthWest, a regional HMO. The stock has a current market price of $25, its last dividend (D0) was $2.00, and the companys earnings and dividends are expected to increase at a constant growth rate of 10 percent. The required return on this stock is 20 percent. From a strict valuation standpoint, should Jane buy the stock? (7 Points)

21. Lucas Clinics last dividend (D0) was $1.50. Its current equilibrium stock price is $15.75, and its expected growth rate is a constant 5 percent. If the stockholders required rate of return is 15 percent, what is the expected dividend yield and expected capital gains yield for the coming year? (8 Points)

22. California Clinics, an investor-owned chain of ambulatory care clinics, just paid a dividend of $2 per share. The firms dividend is expected to grow at a constant rate of 5 percent per year, and investors require a 15 percent rate of return on the stock. a. What is the stocks value? (5 Points) b. Suppose the riskiness of the stock decreases, which causes the required rate of return to fall to 13%. Under these conditions, what is the stocks value? (5 Points) c. Return to the original 15 percent required rate of return. Assume that the dividend growth rate estimate is increased to a constant 7 percent per year. What is the stocks value? (5 Points)

23. A broker offers to sell shares of Bay Area Healthcare, which just paid a dividend of $2 per share. The dividend is expected to grow at a constant rate of 5 percent per year. The stocks required rate of return is 12 percent. a. What is the expected dollar dividend over the next three years? (5 Points) b. What is the current value of the stock and the expected stock price at the end of each of the next three years? (5 Points) c. What is the expected dividend yield and capital gains yield for each of the next three years? (5 Points) d. What is the expected total return for each of the next three years? (5 Points) e. How does the expected total return compare with the required rate of return on the stock? Does this make sense? Explain your answer. (5 Points