The Hugh Co. expects to pay a cash dividend of $2.5 per share next year. Inves

The Hugh Co. expects to pay a cash dividend of $2.5 per share next year. Investors require a 14% return from investments such
as this. If the dividend is expected to grow at a steady 5% per year what will the stock be worth in five years?

A $33.72

B $35.45

C $39.67

D $37.58

Which of the following statements is false concerning the term structure of interest rates?

A The real rate of return has minimal if any effect on the slope of the term structure of interest rates.

B The term structure of interest rates includes both an inflation premium and an interest rate risk premium.

C If interest rates are expected to increase in the future the graph depicting the term structure of interest rates will be
downward-sloping.

D Expectations of lower inflation rates in the future tend to lower the slope of the term structure of
interest rates.

A firm just paid a dividend of $2.2. The dividend is expected to grow at a 25% rate for the next 3 years and at a 7% rate
thereafter. What is the value of the stock if the required rate of return is 12%?

a.

$87.60

b.

$80.41

c.

$73.70

d.

$60.03