# The last dividend just paid by Quantum Inc. was \$2.

The last dividend just paid by Quantum Inc. was \$2.00. Quantum’s growth rate is
expected to be a constant 15 percent for 3 years, after which dividends are expected to
grow at a rate of 10 percent forever. Quantum’s required rate of return on equity (ks) is
14 percent. What is the current price of Quantum’s common stock?
a) \$62.57
b) \$57.13
c) \$54.88
d) \$53.04
e) \$48.14
7) Analysts expect Marble Comics to pay shareholders \$1.00 per share annually over the
next five years. After that, the dividend will be \$1.50 annually forever. Given a
discount rate of 10%, what is the value of the stock today?
a) \$13.10
b) \$14.30
c) \$15.20
d) \$16.10
e) \$17.30
8) ABC company is expected to experience a 40% annual growth rate for the next 3 years
(years 1-3) and a 25% annual growth rate for the two following years (years 4 and 5). By
the end of 5 years, ABC’s growth rate will slow to 10% percent per year indefinitely.
Stockholder require a return of 12% on ABC’s stock. The most recent annual dividend
(D0 ), which was just paid yesterday, was \$5.00 per share. Calculate the value of the
stock today, based on the assumptions above.

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