Super computer companys stock is selling for 100 per

11. Super Computer Company's stock is selling for $100 per share today. It is expected that, at the end of one
year, it will pay a dividend of $6 per share and then be sold for $114 per share. Calculate the expected rate of
return for the shareholders.
A. 20 percent
B. 15 percent
C. 10 percent
D. 25 percent
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12. The valuation of a common stock today primarily depends on
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13. CK Company stockholders expect to receive a year-end dividend of $5 per share and then immediately sell
their shares for $115 dollars per share. If the required rate of return for the stock is 20 percent, what is the current
value of the stock?
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14. Deluxe Company expects to pay a dividend of $2 per share at the end of year 1, $3 per share at the end of
year 2, and then be sold for $32 per share at the end of year 2. If the required rate of return on the stock is 15
percent, what is the current value of the stock?
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Difficulty: Intermediate
15. Casino Inc. expects to pay a dividend of $3 per share at the end of year 1 ( Div
1
) and these dividends are
expected to grow at a constant rate of 6 percent per year forever. If the required rate of return on the stock is 18
percent, what is the current value of the stock today?
A. $25
B. $50
C. $100
D. $54
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16. The constant dividend growth formula P
0
= Div
1
/( r - g ) assumes .
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17. Will Co. is expected to pay a dividend of $2 per share at the end of year 1( Div
1
), and the dividends are
expected to grow at a constant rate of 4 percent forever. If the current price of the stock is $20 per share,
calculate the expected return or the cost of equity capital for the firm.
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Difficulty: Intermediate