1. Given the following data, what is the stock's expected growth rate according to the Gordon model?
Dividend per share just paid: $2
Current market price: $40
Required rate of return: .10
Assume the stock is priced in equilibrium.
a. 5.65%
b. 6.94%
c. 3.32%
d. 4.76%
e. 2.01%
2. Based on the following information on DDF common stock, what is the expected price today?
Last dividend per share: $5
Growth rate: 20% per year for years 1 through 2; 10% per year for years 3 to infinity
Required rate of return for the stock: 20%
a. $62
b. $59
c. $71
d. $68
e. $65