Constant Growth: Polish Express just paid a dividend of $$2\mathrm{.}00.$ The dividend will grow at a rate of $8\%$ forever. Investors require a $12\%$ rate of return on the company's stock.

a$.$ Estimate the stock price.

b$.$ If the stock is currently trading for $$40\mathrm{.}00$ on the New York Stock Exchange, would you but it$?$

Constant Growth: Tri$-$Color $($MEX$)$ will pay a $$3\mathrm{.}00$ dividend next year. The dividend will grow at a rate of $7\%$ forever. Investors require a $13\%$ return on the stock price.

a$.$ What is your estimate of the current stock price?

b$.$ If the current market price of $($MEX$)$ is $$75,$ would you buy the stock?

Non$-$Constant Growth: Discounted Dividend Model

World Cup Warriors recently paid a dividend of $$1\mathrm{.}00.$ The dividend will increase at a rate of $15\%$ for three years. Afterwards it will grow at a rate of $5\%$ forever. The required rate of return on the stock is $10\%.$

a$.$ What is the Horizon Value?

b$.$ What is your estimate of the price of the stock?

$4.$ What is the difference between Class A and Class B common stock?

$5.$ What is the preemptive right?

$6.$ Required Return: Saudi Supply has common stock that currently trades for $$30\mathrm{.}00$ per share. Their most recent dividend was $$2\mathrm{.}50$ and the CFO announced that it will grow at a rate of $10\%$ indefinitely. If the Capital Gains Yield is $10\%,$ what is the total return on the stock?

$7.$ CAPM: Wales Penalty $($WP$)$ has stock with a beta of $1\mathrm{.}4$ and Pulisic' Kicks $($PK$)$ has stock with a beta of $0\mathrm{.}8.$ The required return on U$.$S$.$ treasuries is currently $2\%$ and the expected return for the S&P $500$ is $12\%.$

a$.$ What is the required return for $($WP$)?$

b$.$ What is the required return for $($PK$)?$

$8.$ SML: Investors require an $11\%$ return for Messi Meltdown $($MM$)$ common stock. The risk$-$free rate of return is $3\%$ and $($MM$)$ has a beta of $1\mathrm{.}2.$

a$.$ What is the market risk premium?

b$.$ What is the expected return on the market?