Hana Corp estimated the following data:

The dividend will grow as follows

year

growth rate

1

8%

2

8%

3

6%

4 to n

4%

Rate of return

6%

Last dividend paid

$0.10

Find expected price for year one, E(P1)

1. Between $6.40 and $6.50

2. Between $5.40 and $5.50

3. Between $5.50 and $6.05

4. Between $6.05 and $6.40

5. Less than $4.00

Normative theories deal with

1. Why questions

2. How questions

3. Why and how questions

4. What questions

Assume

The riskfree rate of return

6%

The expected return on the market

11%

The required rate of return on stock A

12%

Find the estimated beta for stock A.

13.

(Points: 15.0)

BB Company pays

a dividend of

$4.00per share

The dividend expected growth rate

for the three

coming years

after the three

years

The expected beta

for BB stock

6%

4%

1.2

The risk free rate

3.00%

The market rate

9.00%

Find the estimated current price

14.

(Points: 15.0)

Assume

MM has a portfolio with the following data

Number of stocks

The investment on each stock

The portfolio beta

20

$7,500

1.12

MM sold one stock and bought another. The

following data pertains to these stocks.

Beta of sold stock

Selling price

Beta of the new stock

Acquiring price

Find the portfolio new beta.

1

$7,500

1.75

$7,500