12. LCP, a new medical group, just paid (moments before time 0) a dividend of $1.00. These dividends are expected to grow at 20% a year for the next two years (ie, t-1 and ts2), and at 4% a year thereafter. What is the value of the stock if the discount rate is 127 a. Equal to $15 b. Between $15 and $16 c. Between $17 and $18 d. Greater than $18 13. The market value of Charon Ferries' common stock is $16 million and the market value of its tisk fre premium e debt is $4 milion. The beta of the company's common stock is 1.5 and the expected risk There are no taxes. If the Treasury bill rate is 5 on the market portfolio is 8 percent. percent, what is the company's cost of capital? a, b. c. d. Less than 10% Between 13 and 15% Between 16 and 18% Between 19 and 21% 14. You are considering inwesting in Ford Motor Company. Which of the following are examples of diversifiable risk? L Risk resulting from possibility of a stock market crash n. Risk resulting from uncertainty regarding a possible strike against Ford ili. Risk resulting from an expensive recall of a Ford product IV. Risk resulting from interest rates decreasing a. Il only b. I and Iv c. Il and 11 d. All of these are diversifiable risks e. None of these are diversifiable risks 15. Assuming two investments have equal lives, a high discount rate tends to favor a. the investment with large positive cash flow(s) early. b. the investment with large positive cash flowls) late. c. the investment with even (flat) yearly cash flowls) d. neither investment since they have equal lives