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Answer the following questions. a. You believe that a corporation's dividend next year is $5. If the price of the stock is $90, what should
Answer the following questions. a. You believe that a corporation's dividend next year is $5. If the price of the stock is $90, what should be its dividend growth rate assuming a 6 percent required return using the Gordon growth model? b. The current price of a stock is $50 and you plan to sell it in two years. If dividends are expected to be $1.5 per share for the next two years, and the required return is 2%, what should the price of the stock be when you sell it? c. A lottery claims its grand prize is $8 million, payable over 2 years at $4 million per year. If the first payment is made two years from now, what is this grand prize really worth today? Use an interest rate of 2%. d. Assume the nominal interest rate is 12 percent, the expected inflation rate is 5 percent, and the marginal income tax rate is 25 percent. Calculate the after-tax real interest rate
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