$8$:$47$ C

HW$10$

Question $3(10$ points$)$

Sorenson Corp.$\text{'}$s expected year$-$end dividend is $D_1=$$$4\mathrm{.}00,$ its required return is $r_S=11\mathrm{.}00\%,$ its dividend yield is $6\mathrm{.}00\%,$ and its growth rate is expected to be constant in the future.

What is Sorenson's expected stock price in $7$ years, i$.$e$.,$ what is tilde$(P{)}_7?$

a $$76\mathrm{.}92$

b $$87\mathrm{.}24$

c $$85\mathrm{.}36$

d $$93\mathrm{.}81$

e $$90\mathrm{.}05$

Question $4(10$ points$)$

Church Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product.

Management expects earnings and dividends to grow at a rate of $22\%$ for the next $4$ years, after which competition will probably reduce the growth rate in earnings and dividends to zero, i$.$e$.,g=0.$ The company's last dividend, $D_0,$ was $$1\mathrm{.}25,$ its beta is $1\mathrm{.}20,$ the market risk premium is $5\mathrm{.}50\%,$ and the risk$-$free rate is $3\mathrm{.}00\%.$ What is the current price of the common stock?

a $$32\mathrm{.}69$

b $$26\mathrm{.}57$

c $$28\mathrm{.}97$

d $$23\mathrm{.}39$

e $$27\mathrm{.}37$