1. ABC Company has stock selling @ $65/share. They just paid a dividend of $5.50. Investors expect a return of 14% on their investment in the ABC Company. What is the expected growth rate of future dividends?

2. Gordon Company has bonds with a face value of $1000, a coupon rate of 7% with payments occurring semi-annually, and a 9-year life. Investors require a 10% rate of return on bonds of similar quality. What is the present value of this bond?

3.Madison Company has $1000 bonds that carry a coupon rate of 10% (semi-annual payments) and mature in 15 years.

a. Determine the present value of the bond's cash flows if the required rate of return is 12%.

b. Determine the present value of the bond's cash flows if the required rate of return is 8%.

4. Kameron Company stock is selling for $85/share. They just paid a dividend of $7.50/share. Their expected dividend growth rate is 6.5%.

a. What is the required rate of return on the stock?

b. If growth rate (annual) expectations change to 9%, what will be the required rate ofreturn

5. Morgan, Inc. has preferred stock that pays an annual dividend of $6. What does their stock sell for it the required rate of return on the stock is 12%?

6. Orson Company, Inc. recently paid a dividend on their common stock. The amount of the dividend was $3.50 (per share). Investors require an 11% rate of return on their investment. Their expected growth rate is 4.5%. What is the value of their stock?