Problem 3:

A firm can grow at a high rate of 15% for the next 5-years; and hence its

dividends. It has an expected long-run constant dividend growth rate of 7% and

the most recent dividend D0, was $5.00. The required rate of return on the stock is 20%. Calculate the current price of the stock using a two-stage dividend growth model.

Problem 4:

If the dividends on a preferred stock is $9 per year, and the required rate of return on the stock is 12%, then calculate the current price of the preferred stock

Problem 5: (See Problem 1_Demonstration)

Michigan Electric Company Bonds

Face Value

$1,000.00

Coupon Rate

6.00%

Frequency

2 (Semi-Annual Interest Payments)

Maturity (Years)

15

Yield to Maturity

6.80%

Given the yield to maturity; Calculate the price of the bond using PV function in Excel