Question 31. Whited Inc.’s stock currently sells for $35.

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 four-year 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%