8-19Value a Constant Growth Stock Financial analysts forecast Safeco Corp.s (SAF) growth rate for the future to be 8 percent. Safecos recent dividend was $0.88. What is the value of Safeco stock when the required return is 12 percent? (LG8-5)

P0= 0.88/(.12-.08)= 0.88/0.04=$22( is this one correct?)

8-25P/E Ratio Model and Future Price Kellogg Co. (K) recently earned a profit of $2.52 earnings per share and has a P/E ratio of 13.5. The dividend has been growing at a 5 percent rate over the past few years. If this growth rate continues, what would be the stock price in five years if the P/E ratio remained unchanged? What would the price be if the P/E ratio declined to 12 in five years? (LG8-7)

8-33Variable Growth A fast-growing firm recently paid a dividend of $0.35 per share. The dividend is expected to increase at a 20 percent rate for the next three years. Afterwards, a more stable 12 percent growth rate can be assumed. If a 13 percent discount rate is appropriate for this stock, what is its value? (LG8-6)

8-34Variable Growth A fast-growing firm recently paid a dividend of $0.40 per share. The dividend is expected to increase at a 25 percent rate for the next four years. Afterwards, a more stable 11 percent growth rate can be assumed. If a 12.5 percent discount rate is appropriate for this stock, what is its value? (LG8-6)