The following information concerns Questions 43-45. You are considering a potential investment in a company that appears to be a great value. The company is expected to earn $9.50 per share at the end of this year. The required rate of return for this stock is 8 percent. 43. Considering the above information, what is the appropriate price per share for the stock if the company pays out all earnings as dividends? 10 A. $108.33. B. $128.75. C. $134.46. D. $99.75. E. None of the above. Consider the above information. If the company were to pay out half (50%) of its earnings as dividends and re-invest the remainder in the company to growth its business and earn a return on equity (ROE) of 10 percent, what is the price (value) per share under this new policy? (Hint: use 2 decimal places for your calculations.) A. $158.33. B. $128.75. C. $144.46. D. $169.65. E. None of the above. 45. Considering the above information, what is the present value of growth opportunities (PVGO) per share for this company? A. $32.56. B. $29.55. C. $39.58. D. $41.38. E. None of the above. 46. Suppose you expect Shoppers Drug Mart's stock to pay dividends of $0.76 per share in the coming year and to trade for $55.50 per share at the end of the year. If investments with equivalent risk to Shoppers Drug Mart's stock have an expected required return of 8.80%, what is the most you would pay today for Shoppers Drug Mart's stock? (Hint: use 2 decimal places for your calculations.) A. $38.10. B. $41.70. C. $57.90. 11 D. $69.29. E. None of the above. 47. You decided to purchase preferred stocks from Goldman Sacks. These shares have no maturity and promise to pay $500 million annually in dividends. These dividends are expected to continue into the indefinite future. Assuming that you want a 10% annual return on your invest- ment, what is the purchase price of your preferred stock? A. $10 million. B. $6 billion. C. $8 million. D. $5 billion. E. None of the above. 48. If a stock's price decreased during the past week, what is the most likely prediction about this week's price change? A. Price will reverse last week's loss and go up. B. Price will continue last week's decline. C. Price will stand still until new information is released. D. Either direction of price change is equally likely. E. None of the above. 49. What is the expected dividend to be paid in three years if yesterday's dividend was $6.00, dividends are expected to grow at a constant 6% annual rate, and the firm has a 10% expected return? A. $9.37. B. $7.80. C. $7.14. D. $6.75. E. None of the above. 50. A firm expects earnings next year of $10.00 per share, has a plowback ratio of 35 percent, a return on equity of 20 percent, and a required 12 return of 15 percent. What is the stock price for this firm, assuming that growth is to be constant. A. $51.40. B. $81.25. C. $67.43. D. $86.94. E. None of the above. The following information concerns Questions 43-45. You are considering a potential investment in a company that appears to be a great value. The company is expected to earn $9.50 per share at the end of this year. The required rate of return for this stock is 8 percent. 43. Considering the above information, what is the appropriate price per share for the stock if the company pays out all earnings as dividends? 10 A. $108.33. B. $128.75. C. $134.46. D. $99.75. E. None of the above. Consider the above information. If the company were to pay out half (50%) of its earnings as dividends and re-invest the remainder in the company to growth its business and earn a return on equity (ROE) of 10 percent, what is the price (value) per share under this new policy? (Hint: use 2 decimal places for your calculations.) A. $158.33. B. $128.75. C. $144.46. D. $169.65. E. None of the above. 45. Considering the above information, what is the present value of growth opportunities (PVGO) per share for this company? A. $32.56. B. $29.55. C. $39.58. D. $41.38. E. None of the above. 46. Suppose you expect Shoppers Drug Mart's stock to pay dividends of $0.76 per share in the coming year and to trade for $55.50 per share at the end of the year. If investments with equivalent risk to Shoppers Drug Mart's stock have an expected required return of 8.80%, what is the most you would pay today for Shoppers Drug Mart's stock? (Hint: use 2 decimal places for your calculations.) A. $38.10. B. $41.70. C. $57.90. 11 D. $69.29. E. None of the above. 47. You decided to purchase preferred stocks from Goldman Sacks. These shares have no maturity and promise to pay $500 million annually in dividends. These dividends are expected to continue into the indefinite future. Assuming that you want a 10% annual return on your invest- ment, what is the purchase price of your preferred stock? A. $10 million. B. $6 billion. C. $8 million. D. $5 billion. E. None of the above. 48. If a stock's price decreased during the past week, what is the most likely prediction about this week's price change? A. Price will reverse last week's loss and go up. B. Price will continue last week's decline. C. Price will stand still until new information is released. D. Either direction of price change is equally likely. E. None of the above. 49. What is the expected dividend to be paid in three years if yesterday's dividend was $6.00, dividends are expected to grow at a constant 6% annual rate, and the firm has a 10% expected return? A. $9.37. B. $7.80. C. $7.14. D. $6.75. E. None of the above. 50. A firm expects earnings next year of $10.00 per share, has a plowback ratio of 35 percent, a return on equity of 20 percent, and a required 12 return of 15 percent. What is the stock price for this firm, assuming that growth is to be constant. A. $51.40. B. $81.25. C. $67.43. D. $86.94. E. None of the above