Hackworth Company's common stock is expected to pay a $7.40 dividend in the coming year . If investors require a 19% return and the growth rate in dividends is expected to be 7%, what should the market price of the stock be? Round to two decimal places .

i) describe and interpret the assumptions related to the problem.

ii) Apply the appropriate mathematical model to solve the problem

iii) calculate the correct solution to the problem.

SAMPLE QUESTION ATTACHED.

Sample Questions and Solutions Sample Question #1: A company has an issue of 12-year bonds that pay 5% interest, annually. Further assume that today's required rate of return on these bonds is 7%. How much would these bonds sell for today? Round off to the nearest $1. Solution The problem assumes that the face value of the bord is $1000. The bond will pay an annual coupon of 5% i.e., coupon or interest amount of $50 is assumed to paid every year: It also assumes that investors currently required a return of 7% on investments with similar risk characteristics. The use of bond valuation concept is appropriate to calculate the true value of these bonds. The accuracy of the solution depends on the correctness of the assumptions on face value, coupon payments and required rate of return assumption The use of bond valuation concept which suggests that the true value of a bond is the present value of its future coupon and face value discounted at investors required rate of return is appropriate to calculate the true value of these bonds. We are required to compute the present value (PV) which represents the true value of the bond. FV=$1000; PMT-$50; Rate = 7%; N=12 years; Compute PV = ? $841.15 Value of the Bond = $841.15