Question 1

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A share of common stock just paid a dividend of $1.00. If the expected long-run growth rate for this stock is 5.4%, and if investors' required rate of return is 14.2%, then what is the stock price?

Select one:

a.

$12.70

b.

$11.98

c.

$14.61

d.

$10.66

e.

$12.10

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Question 2

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A stock just paid a dividend of D₀ = $1.50. The required rate of return is r_s = 14.1%, and the constant growth rate is g = 4.0%. What is the current stock price?

Select one:

a.

$19.15

b.

$12.97

c.

$12.82

d.

$18.84

e.

$15.45

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Question 3

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If D₀ = $2.25, g (which is constant) = 3.5%, and P₀ = $54, then what is the stock's expected dividend yield for the coming year?

Select one:

a.

4.23%

b.

3.45%

c.

3.75%

d.

4.31%

e.

5.05%

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Question 4

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The constant growth DCF model used to evaluate the prices of common stocks is conceptually similar to the model used to find the price of perpetual preferred stock or other perpetuities.

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True

False

Question 5

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Goode Inc.'s stock has a required rate of return of 11.50%, and it sells for $29.00 per share. Goode's dividend is expected to grow at a constant rate of 7.00%. What was the last dividend, D₀?

Select one:

a.

$0.95

b.

$1.38

c.

$1.37

d.

$1.22

e.

$1.06