biple Choice Problems (4 points each) SHOW YOUR WORK! and CHOOSE the CLOSEST 30 The value of a common stock that just paid a $3.00 dividend will be investors require a 12% return and dividends and earnings are expected to grow at 8% per year. a) S66.67 b) $72.00 58100 dS125.00 if &(1+0.08) 0.12-.0e P(1+9) C-ea 31. Jane Smith, an investor in George Inc. estimates George Inc.'s beta to be 1.9. The risk-free rate is 4%, and the market risk premium is expected to be 7%. Smith also expects George Inc. to pay a $1.00 dividend next year. She can currently pay $20 for George Inc., in the market and expects to eil it for $22.00 one year later. Which of the following statements regarding George Inc. is true? PROVE YOUR ANSWER-SHOW YOUR WORK FOR FULL CREDIT!! a) Because the expected returm is 15.0% and the required return based on the CAPM is 9.7 % . George Inc., is currently undervalued. b Because the expected retum is 12.5% and the required return based on the CAPM is 10.3 % George Inc., is cumently undervalued. e) Because the expected return is 12.5 % and the required return based on the CAPM is 6.7 %, George Inc., is currently undervalued. d) Because the expected return is 15.0 % and the required return based on the CAPM is 17.3 %, George Inc., is currently overvalued. STAR 32 A speculator purchases a call option for a premium of $3, with an exercise price of $32 The stock is presently priced at $30, and falls to $28 before the expiration date. What is the net gain or loss to the purchaser? A. loss $1 B loss $3 C. gain SI D. gain $3 SE? tax dollars the firm, equity does ee rate plus risk premiu odel. Which of the following i ice of the stock back to time zeo em in the