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6. The Slow Starter Auto Parts Company has just recently been organized. It is expected to experience no growth for the next two years. However,
6. The Slow Starter Auto Parts Company has just recently been organized. It is expected to experience no growth for the next two years. However, Slow Starter will grow at an annual rate of 5% in the third year and beginning in the fourth year should attain a 10% growth rate which it will sustain thereafter. The last dividend paid was $0.50 per share. If Slow Starter has a required rate of return of 12%, what is the expected price of the stock today? (15 pts) Extra Credit Company Shares Outstanding 1,000 9,000 5,000 Price (1/1/07) $10 $50 Price (12/31/07) $12 $40 $50 $30 If the index is value weighted, what will be the value of the index on 12/31/07 using 1/1/07 as the base (100)? (10pts)
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