10) XYZ stock is currently selling for $48.01 per share. The company just paid its first annual dividend of $3.41 a share. The firm plans to increase the dividend by 4.8 percent per year indefinitely. What is the expected return on XYZ stock?

Enter your answer in percentages rounded off to two decimal points

9)A company finances its operations with 50 percent debt and the rest using equity. The annual yield on the company’s debt is 3.2% and the required rate of return on the stock is 10.4%. What is company’s WACC? Assume the tax rate is 30%

Round the answer to the nearest 2 decimal percentage points. For example, if your answer is 12.345%, then enter 12.35 in the answer box.

8) A preferred stock pays a constant dividend of $2.27. The required rate of return is 9.7%. Calculate its price.

7) A stock is expected to pay a dividend of $1.73 at the end of the year. The dividend is expected to grow at a constant rate of 6.6%. The required rate of return is 12.4%. What is the stock’s current price?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box

6) A stock just paid a dividend of D0 = $1.19. Dividend is expected to grow at a constant rate of 7.7%. The required rate of return is 10.5%. What is the current stock price?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

5) Tapley Products is a privately held firm whose forecasted earnings per share (EPS) are $10.12, and suppose the average price/earnings (P/E) ratio for a set of similar publicly traded companies is 13.6. Estimate the intrinsic value of Tapley’s stock.

(Round your answer to the nearest 2 decimal points. For example, if your answer is $12.345, then enter 12.35 in the answer box.)

4)A company just paid $4 dividend and the dividend is expected to grow at a constant rate of 10%. Current stock price is $100. If the required rate of return is 13%, which is likely to happen next?

Stock price will decrease and the expected return will decrease.

Stock price will decrease and the expected return will increase.

Stock price will increase and the expected return will increase.

Stock price will increase and the expected return will decrease.

3) Constant growth model is appropriate for pricing new start ups.

True

False

2) When a company issues equity, it is obligated to pay dividends.

True

False

1)Stocks have fixed maturity dates.

True

False