1. The preferred stock of Dragons Inc. pays a $5 dividend. What is the value of the stock if your required rate of return is 5 percent?
2. Mosser Corporation, Inc. paid a $2 dividend last year. At a constant growth rate of 4 percent, what is the value of the common stock if the investors require a 6 percent rate of return?
3. HomeNet Inc. paid a $4 last year and the stock is currently selling for $60. If investors require a 15% 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?