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5. A company is 100 percent financed by equity capital and has two million shares outstanding. It is expected to earn a constant $20 million per year on its assets and will pay out all future earnings as dividends. If the cost of equity capital is 10%, what is the value of each share of the company's stock? A) $50 B) $100 C) $150 D) $200 6. Ace Corporation pays annual dividends, and it has just paid a $1.00 dividend (DIVO). The dividend is expected to grow by 25 percent this year, 20 percent next year, and 15 percent the following year. After three years, the dividend is expected to grow at a constant rate of 5 percent a year. Suppose the shareholders' required rate of return is 15%, what is the fair value per share of the company's shareholder equity? A) $13.71 B) $14.16 C) $14.70 D) $15.26 22. Suppose investors expect a 4.0% inflation rate in the future. The real risk-free rate is 3.0%, and the market risk premium is 5.0%. The stock of Everest Expeditions has a beta of 1.00. The stock's realized rate of return was averaged at 15.0% over the last 5 years. The required rate of return for the stocks of Everest Expeditions is A) 11.4%. B) 12.0%. C) 12.6%. D) 15.0% 34. Company A wants to acquire Company B and intends to make a cash offer of $27 per share for B's 100,000 shares. Company A expects a post-merger gain of $800,000. Recently, Company B's stock price increased from $20 to $23 per share. However, the CFO of Company A believes that the true stand-alone value of Company B may be $20 per share, not $23 per share. If the fair stand-alone value of Company B is indeed $20 per share, will the merger still generate positive NPV for Company A? A) No, Company A will break even since the merger costs offset the merger gain. B) No, the cost to acquire Company B will exceed the post-merger gain of $800,000. C) Yes, Company A will still make a gain but Company B will capture more of the economic gain than Firm A. D) Yes, Company A will still make a gain and share the post-merger gain with Company B equally