Stock A has an earnings of $5 per share at year 1. The interest rate is 20%, and the return on equity is 25%. If there is a plow-back of 40%, what is the earnings per share at year two (EPS2) ? Select one: a. $5.00 b. $5.50 c. $4.52 d. $6.00 e. none of the above A stock paying $5 in annual dividends in year 1 (div1 = $5) also sells in year 1 for $115 (P1 =$115) and has an expected return of 20% in each year. What might investors expect to pay for the stock two years from now (P2)? Select one: a. $132.25 b. $133.00 c. $130.25 d. $115.00 e. None of the above Your friend promises you a perpetuity of $1 every year, which starts in year 1. However, your friend is an absent-minded guy, paying you $2 at year 9 but no payment at year 10. Except for these two years, in other years, the payment is always $1. Which of the following statements is true? Select one: a. your friend is better off for his being absent-minded b. you are better off for his being absent-minded c. there is no difference for his being absent-minded d. no enough information to make decision e. none of the above You have borrowed a loan of $20,000 from Chase to buy a car. You have promised Chase to make mortgage style payments in each year. If you want to borrow this loan for two years and the interest rate is 2.5% every year, what is the interest payment in year one? Select one: a $100.00 b. $2,500.00 c. $500.00 d. $1,500.00 e. None of the above