Chapter 11. Practice (10 points, 2.5 each) 1. Stock A: current dividend=$2.50, dividend growth rate=3%, required return=9%, current price =$45. Should the investor buy it? V= Do(1+B) D1 (k-g) (k-8) 2. Stock B: current dividend=$1.5, dividend growth rate=2%, beta-1.14, rf=3%, market risk premium=6%. If the current price =$19. Should the investor buy it? V= Do(1+B) D1 (k- (k-) R= Ry+B, (R...-R) 3. Calculate Stock C's dividend growth rate if the dividend payout ratio=30% and the company's ROE=18% Retention ratio = 1 - Dividend payout ratio g=ROE x Retention ratio 4. What is the required rate of return for Stock D, if the current dividend=$2.5, dividend growth rate=4%, and the current price=$28? D r P +8