Assignment 3 Question 1: a) A stock is expected to pay a dividend of $2.75 at the end of the year (i.e., D = 2.75), and it should continue to grow at a constant rate of 5% a year. If its required return is 15%, what is the stock's expected price? b) Universal Stars company is a no growth firm and has two million shares outstanding. It is expected to earn a constant 20 million per year on its assets. If all earnings are paid out as dividends and the cost of capital (required return on its stock ) is 10%, calculate the price per share for the stock. Question 2: a) Wynners com, is expected to pay a dividend of $2 per share at the end of year (DI) and the dividends are expected to grow at a constant rate of 4% forever. If the current price of the stock is $ 20 per share, calculate the expected return or the cost of equity capital for the firm. b) Suppose a firm has of $150 million of common stock, has $25 million of preferred stock, and $75 million of debt. Cost of debt, ra = 10% (before tax) Cost of preferred stock, Ip = 9% Cost of common stock, rs= 13% what is the firm's weighted average cost of capital (WACC), if the tax rate equals34%