Nachman Industries just paid a dividend of D₀ = $0.75. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on this low-risk stock is 8.00%. What is the best estimate of the stock's current market value? Do not round intermediate calculations.

a. $31.62

b. $34.75

c. $32.47

d. $34.00

e. $21.13

Rebello's preferred stock pays a dividend of $1.00 per quarter, and it sells for $55.00 per share. What is its effective annual (not nominal) rate of return?

a. 8.11%

b. 7.27%

c. 7.47%

d. 7.40%

e. 3.64%

You hold a diversified $100,000 portfolio consisting of 20 stocks with $5,000 invested in each. The portfolio's beta is 1.12. You plan to sell a stock with b = 0.90 and use the proceeds to buy a new stock with b = 1.50. What will the portfolio's new beta be? Do not round your intermediate calculations.

a. 1.150

b. 1.310

c. 1.165

d. 1.195

e. 1.500

An increase in a firm's expected growth rate would cause its required rate of return to

a. decrease.

b. possibly increase, possibly decrease, or possibly remain constant.

c. fluctuate less than before.

d. fluctuate more than before.

e. increase.

Company A has a beta of 0.70, while Company B's beta is 1.40. The required return on the stock market is 9.00%, and the risk-free rate is 2.25%. What is the difference between A's and B's required rates of return? (Hint: First find the market risk premium, then find the required returns on the stocks.) Do not round your intermediate calculations.

a. 6.975%

b. 6.300%

c. 4.725%

d. 9.338%

e. 3.150%

Whited Inc.'s stock currently sells for $28.75 per share. The dividend is projected to increase at a constant rate of 6.75% per year. The required rate of return on the stock, r_s, is 11.50%. What is the stock's expected price 5 years from now?

a. $49.55

b. $30.69

c. $36.26

d. $32.06

e. $39.85