Part 1 Company Z primes earnings and dividends per share are expected to grow by 2 a year Its growth will stop after year 4 In year 5 and afterward, it will pay out all earnings as dividends Assume next years dividend is $10, the market capitalization rate is 12 and next years EPS is $17 What is Z primes stock price (Do not round intermediate calculations Round your answer to 2 decimal places ) Part 2 Company's Z's earnings and dividends per share are expected to grow indefinitely by 2 a year Assume next year's dividend per share is $3 and next year's EPS is $4 The market capitalization rate is 10 If Company Z were to distribute all of its earnings, it could maintain a level dividend stream of $4 a share How much is the market actually paying per share for growth opportunities (Do not round intermediate calculations Negative amount should be indicated by a minus sign Round your answer to 2 decimal places ) Present value growth opportunities $ Part 3 Stock A is expected to provide a dividend of $11 50 a share forever Stock B is expected to pay a dividend of $6 50 next year Thereafter, dividend growth is expected to be 4 00 a year forever Stock C is expected to pay a dividend of $4 50 next year Thereafter, dividend growth is expected to be 20 00 a year for five years (i e , years 2 through 6) and zero thereafter a 1 If the market capitalization rate for each stock is 10 00 , what is the stock price for each of the stocks (Do not round intermediate calculations Round your answers to 2 decimal places ) Stock Price Stock A $ Stock B $ Stock C $ a 2 Which stock is the most valuable Stock C Stock B Stock A b 1 If the market capitalization rate for each stock is 7 00 , what is the stock price for each of the stocks (Do not round intermediate calculations Round your answers to 2 decimal places ) Stock Price Stock A $ Stock B $ Stock C $ b 2 Which stock is the most valuable Stock A Stock B Stock C Part 4 Pharmecology just paid an annual dividend of $1 45 per share Its a mature company, but future EPS and dividends are expected to grow with inflation, which is forecasted at 3 25 per year The nominal cost of capital is 10 00 a What is Pharmecologys current stock price (Do not round intermediate calculations Round your answer to 2 decimal places ) Current stock price $ b What would be Pharmecologys current stock price using forecasted real dividends and a real discount rate (Do not round intermediate calculations Round your answer to 2 decimal places ) Current stock price $

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Part 1 Company Z-primes earnings and dividends per share are expected to grow by 2% a year. Its growth will stop after year 4. In

Part 1

Company Z-primes earnings and dividends per share are expected to grow by 2% a year. Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. Assume next years dividend is $10, the market capitalization rate is 12% and next years EPS is $17. What is Z-primes stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Part 2

Company's Z's earnings and dividends per share are expected to grow indefinitely by 2% a year. Assume next year's dividend per share is $3 and next year's EPS is $4. The market capitalization rate is 10%. If Company Z were to distribute all of its earnings, it could maintain a level dividend stream of $4 a share. How much is the market actually paying per share for growth opportunities? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.)

Present value growth opportunities $

Part 3

Stock A is expected to provide a dividend of $11.50 a share forever.
Stock B is expected to pay a dividend of $6.50 next year. Thereafter, dividend growth is expected to be 4.00% a year forever.
Stock C is expected to pay a dividend of $4.50 next year. Thereafter, dividend growth is expected to be 20.00% a year for five years (i.e., years 2 through 6) and zero thereafter.

a-1. If the market capitalization rate for each stock is 10.00%, what is the stock price for each of the stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

	Stock Price
Stock A	$
Stock B	$
Stock C	$

a-2. Which stock is the most valuable?

	Stock C
	Stock B
	Stock A

b-1. If the market capitalization rate for each stock is 7.00%, what is the stock price for each of the stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

	Stock Price
Stock A	$
Stock B	$
Stock C	$

b-2. Which stock is the most valuable?

	Stock A
	Stock B
	Stock C

Part 4

Pharmecology just paid an annual dividend of $1.45 per share. Its a mature company, but future EPS and dividends are expected to grow with inflation, which is forecasted at 3.25% per year. The nominal cost of capital is 10.00%.

a. What is Pharmecologys current stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Current stock price $

b. What would be Pharmecologys current stock price using forecasted real dividends and a real discount rate? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Current stock price $