1. Investors require a return of 16.8% per year to hold a stock. The stock currently does not pay any dividends. The stock is expected to begin paying a dividend of $1.65 per share in three years. After they begin, the dividends are expected to grow forever at a constant rate of 8.0% per year. What is the stock’s intrinsic value per share?
1) $17.34
2) $13.74
3) $11.74
4) $16.05
5) $14.41
2. The risk-free interest rate is 2.3% per year, the market risk premium is 5.1% per year, and a stock’s beta is 0.85. What is the stock’s annual expected return?
1) 7.2%
2) 7.8%
3) 6.6%
4) 6.9%
5) 7.5%