12.5. 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.

12.6. 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?

12.7. 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?

12.8. St. John Medical, a surgical equipment manufacturer, has been hit hard by increased competition. Analysts predict that earnings and dividends will decline at a rate of 5 percent annually into the foreseeable future. If the firms last dividend (D0 ) was $2.00 and the investors required rate of return is 15 percent, what will be the companys stock price in three years?

12.9. 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?

b. Suppose the riskiness of the stock decreases, which causes the required rate of return to fall to 13 percent. Under these conditions, what is the stocks value?

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?