Financial Management

Lee's Food Fair's stock has a bets value of 1.5. Last year, the company paid a dividend of $2.30, and it expects a constant growth rate of 5% in dividends per share, camings and stock price. Assume that the current risk-free rate is 7% and the market risk premium is 6%. Required: i) Calculate the required rute of return for the stock. (5 marks) ii) What is the equilibrium price of the stock? (5 marks) b) A telecommunications company is expectod to enjoy dividend growth of 22% for the next two (2) years, after which the dividend growth is expected to follow a constant rate of 8%. The company's last dividend was \$1.75 and the stockholders' requirad rate of return is 15\%. Required: Calculate the intrinsic value of the stock today (Pe). (15 marks) Lee's Food Fair's stock has a bets value of 1.5. Last year, the company paid a dividend of $2.30, and it expects a constant growth rate of 5% in dividends per share, camings and stock price. Assume that the current risk-free rate is 7% and the market risk premium is 6%. Required: i) Calculate the required rute of return for the stock. (5 marks) ii) What is the equilibrium price of the stock? (5 marks) b) A telecommunications company is expectod to enjoy dividend growth of 22% for the next two (2) years, after which the dividend growth is expected to follow a constant rate of 8%. The company's last dividend was \$1.75 and the stockholders' requirad rate of return is 15\%. Required: Calculate the intrinsic value of the stock today (Pe). (15 marks)