1. The preferred stock of Dragons Inc. pays a $3 dividend. What is the value of the stock if your required rate of return is 10 percent?
2. Mosser Corporation, Inc. paid a $4 dividend last year. At a constant growth rate of 6 percent, what is the value of the common stock if the investors require a 10 percent rate of return?
3. HomeNet Inc. paid a $2 last year and the stock is currently selling for $50. If investors require a 16% return on their investment from buying HomeNet stock, what growth rate would HomeNet have to provide the investors?
4. What are the limitations of the dividend discount model?