5. Marshall Arts Studios just paid an annual dividend of $1.36 a share. The firm plans to pay annual dividends of $1.50, $1.55, and $1.58 over the next 3 years, respectively. After that time, the dividends will grow at a 5% rate indefinitely. What is this stock worth today at a 9 percent discount rate?

A. $32.03 B. $31.15 C. $36.81 D. $41.47 E. $35.93

6. The Absolute Zero Co. just issued a dividend of $3.40 per share on its common stock. The company is expected to maintain a constant 4.5 percent growth rate in its dividends indefinitely. If the stock sells for $53 a share, what is the companys cost of equity?

With the information given, we can find the cost of equity using the dividend growth model. Using this model, the cost of equity is: RE = [$3.40(1.045) / $53] + .045 RE = .1120, or 11.20%