CFINS - CHAPTER 7 Integrative Problem Robert Campbell and Carol Morris are senior vice-presidents of the Mutual of Chicago Insurance Company They are co-directors of the company's pension fund management division. A major new client has requested that Mutual of Chicago present an investment seminar to illustrate the stock valuation process. As a result, Campbell and Morris have asked you to analyze the Bon Temps Company, an employment agency that supplies word processor operators and computer programmers to businesses with temporarily heavy workloads. You are to answer the following questions a. Assume that Bon Temps is a constant growth company whose last dividend (D., which was paid yesterday) was $2 and whose dividend is expected to grow indefinitely at a 6% rate. The appropriate rate of return for Bon Temps' stock is 16%. What is the firm's current stock price? b. Assume that Bon Temps' earnings and dividends are expected to increase by a constant 3% per year- that is, g = 3%. Why might someone be willing to buy such a stock, and at what price should it sell