1.Super Carpeting Inc. (SCI) just paid a dividend (D) of $2.40 per share, and its annual dividend is expected to grow at a constant rate (g) of 5.00% per year. If the required return (rs) on SCI's stock is 12.50%, then the intrinsic value of SCI's shares is$33.60per share.

Use the constant growth model to calculate the appropriate values to complete the following statements about Super Carpeting Inc.:

If SCI's stock is in equilibrium, the current expected dividend yield on the stock will be???per share.

SCI's expected stock price one year from today will be???per share.

If SCI's stock is in equilibrium, the current expected capital gains yield on SCI's stock will be???per share.

2.As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock.

Consider the case of Portman Industries:

Portman Industries just paid a dividend of $3.12 per share. The company expects the coming year to be very profitable, and its dividend is expected to grow by 12.00% over the next year. After the next year, though, Portman's dividend is expected to grow at a constant rate of 2.40% per year.

Assuming that the market is in equilibrium, use the information just given to complete the table.