The Record, Inc. is a firm that archives computer records of numerous business firms to save them computer space and yet allow them easy retrieval. The firm has one million common shares outstanding. The growth rate for Records, Inc. is five percent, and analysts expect it to remain constant for the foreseeable future. The last dividend paid (D0) was $0.95. Investors' required rate of return is 15 percent.

a. What is the current value or price of the Record's stock?

b. What is the expected dividend yield?

c. What is the expected capital gain yield?

d. What is the expected total rate of return?

e. Why refer to each of the components as expected values

f. What is the stock price one year from now?

g. What is the expected dividend yield one year from now?

h. What is the expected capital gain yield one year from now?

i. What is the expected total rate of return one year from now?

j. If the growth rate were 8 percent instead of 5 percent, what would be the value of Record's stock today?

k. If the growth rate were as stated initially (5 percent), but the required rate of return increased from 15 percent to 17 percent, what would be the value of Record's stock?

l. Assume the required rate of return is back to its original value of 15 percent, and the growth rate is still constant at 5 percent. If the last dividend paid (Dividendyear0) had been $1.00 instead of $0.95, what would be the value of Record's stock?

m. What are the two necessary conditions for the Constant Growth Model to work?