6. Rosie's just paid a dividend of $1 per share. The firm maintains a constant dividend policy and distributes dividends on an annual basis. The firm is growing by 2.5 percent per year. What is the anticipated dividend for year 3?

7. Sid's Video Store have just paid an annual dividend of $2.15 next month. The company just announced that future dividends will be increasing by 1.5 percent annually. How much are you willing to pay for one share of this stock if your required return is 14 percent?

8. The common stock of Carter & Sons is selling for $29 a share and has a 17 percent rate of return. The growth rate of the dividends is 12 percent annually. What is the amount of the next dividend?

9. What is the value today of a stock that will pay a dividend of $1.00 next year, $1.40 in two years, if its expected price in two years is $40 and it has a required rate of return of 6%?

10. Suppose you expect Koch Industries to pay an annual dividend of $2.31 per share in the coming year and to trade $82.75 per share at the end of the year. If investments with equivalent risk to Koch's stock have an expected return of 8.9%, what is the most you would pay today for Koch's stock? What dividend yield and capital gain rate would you expect at this price?

11. Suppose Target Corporation plans to pay $0.68 per share in dividends in the coming year. If its equity cost of capital is 10% and dividends are expected to grow by 8.4% per year in the future, estimate the value of Target's stock.

12. Lengefeld Manufacturing expects to have earnings per share of $2 in the coming year. Rather than reinvest these earnings and grow, the firm plans to pay out all of its earnings as a dividend. With these expectations of no growth, Lengefeld's current share price is $24. Suppose Lengefeld could cut its dividend payout rate to 50% for the foreseeable future and use the retained earnings to open an additional factory. The return on investment in the new factory is expected to be 15%. If we assume that the risk of the new factory is the same as the risk of its existing factories, then the firm's equity cost of capital is unchanged. What effect would this new policy have on Lengefeld's stock price?

13. Suppose Lengefeld Manufacturing decides to cut its dividend payout rate to 50% to invest in new stores, as in Example 7.3b. But now suppose that the return on these new investments is 8%, rather than 15%.

14. Give its expected earnings per share this year of $2 and its equity cost of capital of 8.33% (we again assume that the risk of the new investments is the same as its existing investments), what will happen to Lengefeld's current share price in this case?

15. Annie-Bell, Inc., has just invented hotdog/taco combo. Given the phenomenal market response to this product, Annie-Bell is reinvesting all of its earnings to expand its operations. Earnings were $5 per share this past year and are expected to grow at a rate of 30% per year until the end of year 3. At that point, other companies are likely to bring out competing products. Analysts project that at the end of year 3, Annie-Bell will cut its investment and begin paying 75% of its earnings as dividends. Its growth will also slow to a long-run rate of 5%. If Annie-Bell's equity cost of capital is 9%, what is the value of a share today?