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    Lashgari Company: A stock just paid a dividend of $1

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    6. A stock just paid a dividend of $1. The required rate of return is rs = 11%, and the constant growth rate is 5%. What is the current stock price?

    $15.00
    $17.50
    $20.00
    $22.50
    $25.00

    7. The Lashgari Company is expected to pay a dividend of $1 per share at the end of the year, and that dividend is expected to grow at a constant rate of 5% per year in the future. The company's beta is 1.2, the market risk premium is 5%, and the risk-free rate is 3%. What is the company's current stock price?

    $15.00
    $20.00
    $25.00
    $30.00
    $35.00

    8. An increase in a firm's expected growth rate would normally cause its required rate of return to

    Increase.

    Decrease.

    Fluctuate.

    Remain constant.

    Possibly increase, decrease, or have no effect.

    9.Harrison Clothiers' stock currently sells for $20 a share. It just paid a dividend of $1.00 a share (that is D0 = $1.00). The dividend is expected to grow at a constant rate of 6 percent a year. What stock price is expected 1 year from now? What is the required rate of return?

    10. A stock is expected to pay a dividend of $0.50 at the end of the year (that is, D1 = 0.50), and it should continue to grow at a constant rate of 7 percent a year. If its required return is 12 percent, what is the stock's expected price 4 years from today?

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    Solution Preview

    6. A stock just paid a dividend of $1. The required rate of return is rs = 11%, and the constant growth rate is 5%. What is the current stock price?

    $15.00
    $17.50
    $20.00
    $22.50
    $25.00

    Answer: $17.50

    P = (1 + 5%)/(11% - 5%) = 17.50

    7. The Lashgari Company is expected to pay a dividend of $1 per share at the end of the year, and that dividend is expected to grow at a ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer what is the current stock price.

    $2.19

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