A stock is expected to pay no dividends for the first three yeans. The dividend for Year 4 is expected to be $2.00 and it is anticipated that the dividend will grow at a constant rate of 45 percent a year thereafter . The discount rate on the stock is 8 % .

5. What is the fair market value of the stock today?

a. 34.32

b. 65.30

C.50.66

d. 27.32

e 45.36

6. Assume you buy the stock at $3 less than its intrinsic value and also assume that you hold the stock for 4 years then sell it at its fair market price at that point in time. What will be your annual rate of return from the investment?

a. 8.27 %

b . 13.25 %

c . 9.8 6 %

d . 11.52 %

E.12.72 %

6. Assume you buy the stock at $3 less than its intrinsic value and also assume that you hoild the stock for 4 years then sell it at its fair market price at that point in tiune. What will be your annual rate of return from the investment?

a. 8.27 %

b . 13.25 %

c . 9.8 6 %

d . 11.52 %

E.12.72 %