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Corporate Finance and Stocks

# Corporate Finance and Stocks -...

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The answers are marked in Bold 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 = 12.5%, and the expected constant growth rate is g =  8.5%. What is the current stock price? a. \$17.82 b. \$18.28  c. \$18.75  d. \$19.22 e. \$19.70  2. 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?  a.6.50%  b. 6.83% c. 7.17% d.  7.52% e. 7.90%  3. McDonnell Manufacturing is expected to pay a dividend of \$1.50 per share at the end of the year (D1 = \$1.50). The stock sells for \$34.50 per share, and its  required rate of return is 11.5%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate? a. 6.46% b.  6.63% c. 6.80% d. 6.97%  e. 7.15%   4. The Zumwalt Company is expected to pay a dividend of \$2.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of  5.00% 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 the company's current stock
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