Rs 07 13 07 75 115 difference is 16 115045 or 45

rS= .07 + (.13-.07) (.75) = .115
difference is .16-.115=.045 or 4.5%
Stock Investment Beta
A $400,000 1.5
B 600,000 (0.50)
C 1,000,000 1.25
D 2,000,000 .75

9-2. Thomas Brothers is expected to pay a $.50 per share dividend at the end of the year (i.e.,
D1=$0.50). The dividend is expected to grow at a constant rate of 7 % a year. The required rate of
return on the stock, rs, is 15%. What is the stock’s current value per share?
9-4. Hart Enterprises already paid a dividend. D0, of $1.25. It expects to have non-constant growth of
20% for 2 years followed by a constant rate of 5% thereafter. The firm’s required return is 10%.
a.
b. What is the firm's horizon, or continuing, value?
c. What is the firm's intrinsic value today, P^ 0 ?
9-6. Fee Founders has perpetual preferred stock outstanding that sells for $60 a share and pays a
dividend of $5 at the end of each year. What is the required rate of return?
=
9-8. Ezzell Corporation issued perpetual preferred stock with a 10% annual dividend. The stock
currently yields 8%, and its par value is $100 .
a. What is the stock’s value?
b. Suppose interest rates rise and pull the preferred stock’s yield up to 12%. What is its new
market value?

9-10. Martell Mining Company’s ore reserves are being depleted, so its sales are falling. Also, because
its pit is getting deeper each year, its costs are rising. As a result, the company’s earnings and
dividends are declining at the constant rate of 5% per year. If D0=$5 and rs = 15%, what is the value of
Martell Mining’s stock.