4) Colons stock has a required return of 12%, and the stock sells for $40 per share. The firm just paid a dividend of $1, and the dividend is expected to grow by 30% per year for the next 4 years. After t = 4, the dividend is expected to grow at a constant rate of X% per year forever. What is the stocks expected constant growth rate after t = 4, i.e., what is X? *

a) 5.17%

b) 5.44%

c) 5.72%

d) 5.34%

None of the above

5) The common stock of Bruner Aeronautics sells for $80 a share. The stock expects to pay $2 per share next month when the annual dividend is distributed. The company has an established a pattern of increasing their dividends by 2% annually. What is the market rate of return on this stock? *

a) 4.5%

b) 2.5%

c) 2%

d) 4%

None of the above