3. (One-period pricing. Recall that since stocks have really long lives, in the video we first imagined owning a stock for only one period. In this simple, yet powerful scenario, today's stock price is the PV of next year's dividend and next year's stock price.) The stock of Alydar Oil, an all-equity firm, is currently trading at $30 per share, after just having paid a $2.40 per share dividend. The market expects a dividend of $3.10 per share to be paid one year from today. If the equity cost of capital (same as discount rate for equity) is 12% for this firm, the expected ex-dividend price (the stock price after the dividend is paid next year) in one year (t = 1) should be closest to $31.20 $31.05 O $30.50 $33.60 ! Incorrect Your calculation was based on the dividend with a wrong timing. 4. Julia's Jewel Company (JC) currently has a stock price of $35 per share. If JJC's cost of equity capital (same as discount rate for equity) is 11% and the current dividend yield (DIV1/PO) is 3.25%, the expected price per share of the company in one year (t = 1) is closest to? $38.10 $38.85 $36.14 $37.71 ! Incorrect It appears that you have randomly picked an answer. 5. Locked-In Real Estate (LIRE) is preparing for their Initial Public Equity Offering (IPO). With its holdings consisting of rent controlled apartments, and no plans for expanding, LIRE plans to payout all of its earnings as dividends. These dividends amount to $7.50 per share, forever. If the expected rate of return is 12%, what is the stock price of LIRE? (Enter just the number in dollars without the $ sign or a comma and round off decimals to the closest integer, i.e., rounding $30.49 down to $30 and rounding $30.50 up to $31.) 51 ! Incorrect How to value an income stock. Simple, yet so powerful and useful