1.Axxon Inc. is expected to pay a $0.70 per share dividend at the end of the year (i.e., D₁ = $0.70). The dividend is expected to grow at a constant rate of 8% a year. The required rate of return on the stock, r_s, is 17%. What is the value of a share of the companys stock? Round your answer to the nearest cent.

2.

Pic-A-Shoes stock currently sells for $25. The stock just paid a dividend of $1.25; that is, D₀ = $1.25. The dividend is expected to grow at a constant rate of 8% a year. What stock price is expected 1 year from now? Round your answer to the nearest cent.

$

What is the required rate of return? Round your answer to two decimal places.

%

3.A stock is trading at $75 per share. The stock is expected to have a year-end dividend of $6 per share (D₁ = $6), and it is expected to grow at some constant rate g_L throughout time. The stock's required rate of return is 10% (assume the market is in equilibrium with the required return equal to the expected return). What is your forecast of g_L? Do not round intermediate calculations. Round the answer to two decimal places.

4.

Nick's Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $3 at the end of each year. The preferred sells for $40 a share. What is the stock's required rate of return? (Assume the market is in equilibrium with the required return equal to the expected return.) Round the answer to two decimal places.

%

5.

Current and projected free cash flows for Radell Global Operations are shown below.

	Actual 2018	2019	Projected 2020	2021
Free cash flow	$614.90	$675.58	$715.63	$772.88
(millions of dollars)

Growth is expected to be constant after 2020, and the weighted average cost of capital is 11.75%. What is the horizon (continuing) value at 2021 if growth from 2020 remains constant? Do not round intermediate calculations. Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number.

$ million

6.

A company currently pays a dividend of $3.2 per share (D₀ = $3.2). It is estimated that the company's dividend will grow at a rate of 15% per year for the next 2 years, and then at a constant rate of 5% thereafter. The company's stock has a beta of 1.3, the risk-free rate is 8%, and the market risk premium is 3%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.

$

7. Assume today is December 31, 2017. Barrington Industries expects that its 2018 after-tax operating income [EBIT(1 T)] will be $440 million and its 2018 depreciation expense will be $65 million. Barrington's 2018 gross capital expenditures are expected to be $110 million and the change in its net operating working capital for 2017 will be $25 million. The firm's free cash flow is expected to grow at a constant rate of 6.5% annually. Assume that its free cash flow occurs at the end of each year. The firm's weighted average cost of capital is 8.1%; the market value of the company's debt is $2.95 billion; and the company has 170 million shares of common stock outstanding. The firm has no preferred stock on its balance sheet and has no plans to use it for future capital budgeting projects. Using the free cash flow valuation model, what should be the company's stock price today (December 31, 2017)? Do not round intermediate calculations. Round your answer to the nearest cent.

8.

Hadley Inc. forecasts the year-end free cash flows (in millions) shown below.

Year	1	2	3	4	5
FCF	-$22.75	$38	$43.3	$51	$55.4

The weighted average cost of capital is 10%, and the FCFs are expected to continue growing at a 5% rate after Year 5. The firm has $24 million of market-value debt, but it has no preferred stock or any other outstanding claims. There are 20 million shares outstanding. What is the value of the stock price today (Year 0)? Do not round intermediate calculations. Round your answer to the nearest cent.

$ per share

According to the valuation models developed in this chapter, the value that an investor assigns to a share of stock is dependent on the length of time the investor plans to hold the stock.