Stewart Industries expects to pay a $3.00 per share dividend on its common stock at the end of the year. The dividend is expected to grow 25% a year until t=3 after which time the dividend is expected to grow at a constant rate of 5% a year. The stock's beta is 1.2, the risk free rate of interest (R_f) is 6% and the rate of return on the market (R_m) is 11%. Use the CAPM equation to find the required rate of return: R_s = R_f + (R_m-R_f)*beta.

11.What is the company's current stock price?

a.$60.00

b.$55.75

c.$59.05

d.$45.60

e.$70.00

12.The dividend yield and capital gains yield at the end of year 1 are:

a.5.08%; 6.92%

b.6.00%; 6.00%

c.6.12%; 5.88%

d.5.80%; 6.90%

e.12%; 10%