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Grading Summary |

Grade Details - All Questions |

1. | Question : | (TCO D) A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 6.4%. What is the stock's current price? | | | Student Answer: | | $17.39 | | | | $17.84 | | | | $18.29 | | | | $18.75 | | | | $19.22 | | Instructor Explanation: | Chapter 7D1 $0.75rs 10.5%g 6.4%P0 = D1/(rs − g) $18.29 | | | | Points Received: | 10 of 10 | | Comments: | | | | 2. | Question : | (TCO D) If D0 = $2.25, g (which is constant) = 3.5%, and P0 = $50, what is the stock’s expected dividend yield for the coming year? | | | Student Answer: | | 4.42% | | | | 4.66% | | | | 4.89% | | | | 5.13% | | | | 5.39% | | Instructor Explanation: | Chapter 7D0 $2.25g 3.5%P0 $50.00D1 = D0(1 + g) = $2.329Dividend yield = D1/P0 = 4.66% | | | | Points Received: | 10 of 10 | | Comments: | | | | 3. | Question : | (TCO D) Molen Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $7.50 per share. If the required return on this preferred stock is 6.5%, at what price should the preferred stock sell? | | | Student Answer: | | $104.27 | | | | $106.95 | | | | $109.69 | | | | $112.50 | | | | $115.38 | | Instructor Explanation: | Chapter 7Preferred dividend $7.50Required return 6.5%Preferred price = DP/rP