Chapter 7 Practice problems 1. Suppose you invest in Banko stock that is expected to pay a $0.90 dividend at the end of 1 period and is expected to have a price of $60.00 at the end of that period. What is the maximum price you are willing to pay assuming you require a 12% rate of retum? 2. You paid $16 for a stock and, after one year, you received a dividend of $0.40 and the stock is valued at $25. What rate of retum will you earn? 3. Suppose you are interested in a stock that is expected to pay a non-growing dividend of $2.40 and the required rate of retum on the stock is 8%. What is the value of the stock? 4. If you are expecting a dividend next year of $1.50, the growth rate is 10%, and the required rate of return is 12%, what is the value of this stock? 5. Brass Industries' most recent dividend was $1.25. Dividends are expected to grow at 6% for 3 years followed by an estimated future growth of 5%. The required retum is 12%. What is the value of Brass Industries' shares