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1.Bubba Gumm Company has an expected ROE of 9%. The dividend growth rate will be _______ if the firm follows a policy of plowing back

1.Bubba Gumm Company has an expected ROE of 9%. The dividend growth rate will be

_______ if the firm follows a policy of plowing back 10% of earnings.

A. 90%

B. 10%

C. 9%

D. 0.9%

E. None of these is correct

2. A preferred stock will pay a dividend of $2.75 in the upcoming year, and every year thereafter,

i.e., dividends are not expected to grow. You require a return of 10% on this stock. Use the

constant growth DDM to calculate the intrinsic value of this preferred stock.

A. $0.275

B. $27.50

C. $31.82

D. $56.25

E. None of these is correct

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