1. Bruins R Us is a mature toy manufacturing firm. The company just paid a dividend of $9.53, but management expects to reduce the payout by 5% per year, indefinitely. If you require a 13 percent return on this stock, what will you pay for a share today?
a. 61.64
b. 125.08
c. 113.17
d. 50.30
e. 55.59
2. XYZ company has just paid a dividend of $8.89 per share. The dividend is expected to grow at a rate of 16 percent annually. If the current ex-dividend stock price of XYZ is $96.33, what is the required rate of return?
a. 10.7 percent
b. 26.7 percent
c. 64.5 percent
d. 25.2 percent