Multiple Choice

Iddurify inse ohotce shat best completes the statement or answers the question.

Expected Price of a Stock at Constant Growth.

You ano evaluating the purchase of a leadiag retail stock that just paid an annual dividend of $$3\mathrm{.}96.$ You expect the dividend to grow at a rate of $5\mathrm{.}0\%$ a year, indefinitely. The beta is $0\mathrm{.}77,$ the return on $T-$bills is $5\mathrm{.}05\%,$ and the return on the market is $9\mathrm{.}54\%.$

Assurning that your analysis is correct, what is the most that you would be willing to pay for the retailer's stock if you were ro purchase it today? $($Hint: First calculate the required rate of return, then the expected price.$)$

a$.$ $$99\mathrm{.}62$

b$.$ $$82\mathrm{.}76$

c$.$ $$118\mathrm{.}55$

d$.$ $$129\mathrm{.}99$

e$.$ $$73\mathrm{.}81$

$2.$ Refer to the scenario above. If the stock grows at a constant rate of $5\mathrm{.}0\%,$ what is the expected price in $8$ years?

a$.$ $$205\mathrm{.}93$

b$.$ $$175\mathrm{.}16$

c$.$ $$182\mathrm{.}76$

d$.$ $$169\mathrm{.}99$

e$.$ $$158\mathrm{.}78$