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# The last dividend just paid by Quantum Inc. was \$2.

The last dividend just paid by Quantum Inc. was \$2.00. Quantum's growth rate is

expected to be a constant 15 percent for 3 years, after which dividends are expected to

grow at a rate of 10 percent forever. Quantum's required rate of return on equity (ks) is

14 percent. What is the current price of Quantum's common stock?

a) \$62.57

b) \$57.13

c) \$54.88

d) \$53.04

e) \$48.14

7) Analysts expect Marble Comics to pay shareholders \$1.00 per share annually over the

next five years. After that, the dividend will be \$1.50 annually forever. Given a

discount rate of 10%, what is the value of the stock today?

a) \$13.10

b) \$14.30

c) \$15.20

d) \$16.10

e) \$17.30

8) ABC company is expected to experience a 40% annual growth rate for the next 3 years

(years 1-3) and a 25% annual growth rate for the two following years (years 4 and 5). By

the end of 5 years, ABC's growth rate will slow to 10% percent per year indefinitely.

Stockholder require a return of 12% on ABC's stock. The most recent annual dividend

(D0 ), which was just paid yesterday, was \$5.00 per share. Calculate the value of the

stock today, based on the assumptions above.

6) Current price of Quantum's common stock = D1/(1+r) + D2/(1+r)^2 + D3/(1+r)^3 + D4/(r-g)*1/(1+r)^3 Current price of... View the full answer

• Hi, Thank you again for providing the solutions. Is their a way to solve these problems with the financial calculator using NPV?
• cxk384
• Apr 05, 2018 at 10:39am
• This type of problem is a multi stage growth it needs to be solved using equation method.
• rocky4ever
• Apr 05, 2018 at 10:52am
• Each question has different instruction so its needs to be used equation method
• rocky4ever
• Apr 05, 2018 at 10:53am
• my professor taught us these problems using cash flows and calculating NPV. for example number 7 CF0=0 CF1=1 CF2=1 CF3=1 CF4=1 CF5=16 I=10 then if you calculate NPV the answer is 13.1
• cxk384
• Apr 05, 2018 at 11:26am

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