Question
1.Sam's Personal Finance just paid a dividend of $20. Its dividends are expected to grow at 50% annual rate for each of the next 2
1.Sam's Personal Finance just paid a dividend of $20. Its dividends are expected to grow at 50% annual rate for each of the next 2 years, and then settle down to a steady state of 6% for the foreseeable future. If investors require a 15% rate of return, what should a share of Sam's Stock sell for?
A) $460.87
B) $500.00
C) $395.46
D) $530.00
E) $434.78
2. The earnings of Jack, Inc. are expected to grow over the next 3 years by 30%, 20%, and 10% respectively, and by 2% thereafter. The most recent dividend paid by the company was $1.00 (that is, D0 = 1.00). If the required rate of return is 5%, what is Jack's current equilibrium stock price?
A) $54.54
B) $50.39
C) $58.34
D) $65.18
E) $62.12
Please show work so I can understand it, thank you!
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