14.a

b.

c.

d.

Analysts predict that Ottawa Toys will pay dividends of $3 per share in year 1, $3.5 per share in year 2, and $3.8 per share in year 3. The firm then expects its dividend to decrease by 5% per year for three years (year 4, 5, 6). Thereafter the dividends will grow at 6% indefinitely. The required rate of return is 12%. What is the value of the stock today? 29.2 32.7 38.6 43.2 Fade Ltd's equity beta is 1.25, its common stock just paid a dividend of $0.40/share. The risk-free rate is 1.86%. The current market risk premium is 5.12%. The stock's dividend rate is expected to grow at some constant rate g=0.05. Assuming you believe in the CAPM model, what is your best estimate of share price today? 11.43 12.27 12.88 13.35 Which of the following statements is correct? Growth stocks usually have low P/E ratios. Historically, on average growth stocks outperform value stocks. The dividend discount model cannot be used for firms with low growth. In the Free Cash Flow (FCF) model, we discount the expected FCFs using the cost of capital. The firm-level FCF of New Media Inc. is estimated to be $9.8 million. The company has 2.1 million shares outstanding. You also now that the average P/FCF multiple for comparable companies is 12.9. Using a relative valuation approach, what is the estimated price of a share of New Media Inc Stock? $60.20 $93.40 $126.40 $175.10