Question_MID2_10Dec_2nd
31. Whited Inc.'s 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, r_{s}, is 11.50%. What is the stock's expected price 5 years from now?
a. $40.17
b. $41.20
c. $42.26
d. $43.34
e. $44.46
32. Casino Inc. is expected to pay a dividend of $6 per share at the end of year one and these dividends are expected to grow at a constant rate of 6% per year forever. If the required rate of return on the stock is 18%, what is current value of the stock today?
A) $30
B) $50
C) $100
D) $54
33. Dividend growth rate for a stable firm can be estimated as:
A) Plow back rate / the return on equity (ROE)
B) Plow back rate * the return on equity (ROE)
C) Plow back rate + the return on equity (ROE)
D) Plow back rate  the return on equity (ROE)
34. A fouryear bond has an 8% coupon rate and a face value of $1000. If the current price of the bond is $878.31, calculate the yield to maturity of the bond (assuming annual interest payments).
A) 8%
B) 12%
C) 10%
D) 6%
35. Super Computer Company's stock is selling for $100 per share today. It is expected that this stock will pay a dividend of 5 dollars per share, and then be sold for $120 per share at the end of one year. Calculate the expected rate of return for the shareholders.
A) 20%
B) 15%
C) 10%
D) 25%

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Solution: Question_MID2_10Dec_2nd  Answer