15. Londons stock has a required return of 12%, and the stock sells for $40 per share. The firm just paid a dividend of $1, and the dividend is expected to grow by 30% per year for the next 4 years. After t = 4, the dividend is expected to grow at a constant rate of X% per year forever. What is the stocks expected constant growth rate after t = 4, i.e., what is X? *

A) 5.17%

B) 5.44%

C) 5.72%

D) 6.34%

E) None of the above

18. Cable Companys current stock price is$36.00, its last dividend was $2.40, and its required rate of return is 12%. If dividends are expected to grow at a constant rate, g, in the future and if rs is expected to remain at 12%, what is Cables expected stock price 6 years from now? *

A) $45.95

B) $46.95

C) $47.95

D) $48.24

E) None of the above

19. RMC issued perpetual preferred stock with a 20% annual dividend. The stock currently yields 4%, and its par value is $100. Suppose interest rates rise and pull the preferred stocks yield up to 10%. How much would its market value change? *

A) $200

B) $500

C) ($200)

D) ($500)

E) None of the above

20. Atlas Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 25% for the next 4 years, after which competition will probably reduce the growth rate in earnings and dividends to zero, i.e., g = 0. The companys last dividend, D0, was $1.25, its beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 3.00%. What is the current price of the common stock? *

A) $26.77

B) $27.89

C) $29.05

D) $30.21

E) None of the above