-Ashare of common stock will pay a dividend of S1.00 next year. If the expected long-run growth rate for this stock is

5.4%, and if investors' required rate of return is 10.2%, then what is the stock price?

$24.06

$23.50

$21.96

$20.83

-Po = (Dj/(-8))

= (I(Do (1+8)]/(i-8))

The above formula represents the constant growth model of valuing stocks. Which of the following is true of the above model?

-The stock price equals the value of the next dividend.

-Dividends are assumed to grow at a constant rate.

-The model does not consider risk.

-There is no adjustment for dividend growth.

-Which of the following statements is not true?

Bondholders are generally risk seekers and want managers to take risks.

-Shareholders don't mind managers pursuing risky projects that promise big profits.

-Agency problems can exist between stockholders and managers and also between stockholders and bondholders.

-Bonding with the managers is the most effective solution to agency problems in a corporation

-High Brow Cow Farms, producers of the finest dairy products, has common stock that sells for $54. Dividends are expected to continue to grow at a rate of 8% annually. If investors in High Brow require a 13% rate of return, what is the current dividend?

$3.25

52.50

$4.00

52.70

-Francis Inc.'s stock has a required rate of return of 10.25%, and it sells for $$0.00 per share. The dividend is expected to grow at a constant rate of 6.00% per year. What is the expected year-end dividend, D,?

$3.40

54.25

$3.57

$3.23

$2.89