Question: Please complete the following two problems. Please show your work and all calculations. You intend to purchase Bama, Inc., common stock at $52.75 per share,

Please complete the following two problems. Please show your work and all calculations.

You intend to purchase Bama, Inc., common stock at $52.75 per share, hold it one year, and sell after a dividend of $6.50 is paid. How much will the stock price have to appreciate if your required rate of return is 16 percent?

Blackburn & Smiths common stock currently sells for $23 per share. The companys executives anticipate a constant growth rate of 10.5 percent and an end-of-year dividend of $2.50.

a. What is the expected rate of return if you buy the stock for $23?

b. If you require a 17 percent return, should you purchase the stock?

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