Question 1 (3.33 points) A firm is currently paying a dividend of $2.50. A stock analyst expects the dividend growth rate to decline linearly over the next seven years from 22% in the short run to 4% in the long run. If the required rate of return on the stock is 13%, the value of the stock is closest to: 1) $42.94 O2) $44.14 3) $46.39 4) $48.09 Question 2 (3.33 points) Saved Based on the following income statement and balance sheet; compute the expecte free cash flow to equity in 2009. 2009 2008 Forecast actual Sales 760 650 Cost of goods 410 320 sold Gross Profit 350 330 Depreciation 120 90 EBIT 230 240 Interest expenses 50 70 Pre-tax earnings 180 170 Taxes (30%) 51 Net Income 126 119 54 ABC Corp. Balance Sheet 2009 2008 Forecast actual Cash 90 110 2009 Forecast 70 2008 actual 65 Accounts payables Short-term debts 215 190 439 495 Accounts Receivables Inventory 650 590