4. Constant growth stocks

4.1) Super Carpeting Inc. just paid a dividend (D00) of $3.12, and its dividend is expected to grow at a constant rate (g) of 6.50% per year. If the required return (rss) on Supers stock is 16.25%, what is the intrinsic value of Supers shares?

a) $36.30

b) $34.08

c) $37.20

d) $39.62

4.2) Which of the following statements is true about the constant growth model?

A) The constant growth model implies that dividends remain constant from now to a certain terminal year.

B) The constant growth model implies that dividend growth remains constant from now to infinity.

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

	If Supers stock is in equilibrium, the current expected dividend yield on the stock will be ____
	Supers expected stock price one year from today will be _____
	If Supers stock is in equilibrium, the current expected capital gains yield on Supers stock will be ___