1. A stock is expected to pay a dividend of $0.75 at the end of the year.

The required rate

of return is rs = 10.5%, and the expected constant growth rate is g = 6.4%. What is the
stock's current price?
2. A share of Lash Inc.'s common stock just paid a dividend of $1.00. If the expected long-
run growth rate for this stock is 5.4%, and if investors' required rate of return is 11.4%,
what is the stock price?
3. Franklin Corporation is expected to pay a dividend of $1.25 per share at the end of the
year (D1 = $1.25). The stock sells for $32.50 per share, and its required rate of return is
10.5%. The dividend is expected to grow at some constant rate, g, forever. What is the
equilibrium expected growth rate?
4. $35.50 per share is the current price for Foster Farms' stock. The dividend is projected
to increase at a constant rate of 5.50% per year. The required rate of return on the
stock, rs, is 9.00%. What is the stock's expected price 3 years from today?
5. Kelly Enterprises' stock currently sells for $35.25 per share. The dividend is projected to
increase at a constant rate of 4.75% per year. The required rate of return on the stock,
rs, is 11.50%. What is the stock's expected price 5 years from now?
6. If D1 = $1.50, g (which is constant) = 6.5%, and P0 = $56, what is the stock's expected
capital gains yield for the coming year? What is the Dividend yield?
7. Carby Hardware has an outstanding issue of perpetual preferred stock with an annual
dividend of $7.50 per share. If the required return on this preferred stock is 6.5%, at
what price should the preferred stock sell?
8. Dyer Furniture is expected to pay a dividend of D1 = $1.25 per share at the end of the
year, and that dividend is expected to grow at a constant rate of 6.00% per year in the
future. The company's beta is 1.15, the market risk premium is 5.50%, and the risk-free
rate is 4.00%. What is Dyer's current stock price?
9. Kellner Motor Co.'s stock has a required rate of return of 11.50%, and it sells for $25.00
per share. Kellner's dividend is expected to grow at a constant rate of 7.00%. What was
the last dividend, D0?
10. Connolly Co.'s expected year-end dividend is D1 = $1.60, its required return is rs =
11.00%, its dividend yield is 6.00%, and its growth rate is expected to be constant in the
future. What is Connolly's expected stock price in 7 years, i.e., what is P7 ?
11. Burke Tires just paid a dividend of D0 = $1.32. Analysts expect the company's dividend
to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and
thereafter. The required return on this low-risk stock is 9.00%. What is the best estimate
of the stock's current market value?