1. A stock is expected to pay the following dividends per share over the next four years, respectively: $0.00, $2.30, 2.60, and $2.90. If you expect to be able to sell the stock for $95.83 in four years and your required rate of return is 6%, what is the most that you should be willing to pay for a share of this stock today?
A. $103.63
B. $7.80
C.$82.43
D. $109.38
2. Temple Lunch Trucks, Inc. just paid a dividend of $2.00. Dividends are expected to grow at a rate of 3% per year from here on out. If the risk-free rate is 2%, the MRP is 8%, and Temple Lunch Trucks’ stock is only 40% as risky as the market, what is the most that you should be willing to pay for a share of this stock today?
A. $147.14
B. $142.86
C. $90.91
D. $93.64