Question 5

Wesson Technologies is expected to generate $100 million in FCF next year and FCF is expected to grow at a constant rate of 4% per year. Wesson has $200 million in debt, no preferred stock, and its WACC is 12%. If Wesson has 40 million shares of stock outstanding, what is the stocks value per share?

	$26.25
	$27.50

	$32.50
	$31.25

Question 6

Hazel Corporation issued perpetual preferred stock with a par value of $100. The stock pays a a 8% annual dividend. If the required rate of return for preferred stock is 11% then what is the stocks value?

	$981.82
	$137.50

	$72.73
	$266.67

Question 7

Jordan Mining ore reserves are being depleted, its sales are falling, and its costs are rising. The companys earnings and dividends are declining at the constant rate of 3% per year. If the current dividend (D₀) is $2 and the required rate of return is 12%, what is the value of Jordans stock?

	$13.33
	$12.93

	$11.73
	$22.89

Question 8

Which of the following is true for a constant growth stock?

	As the growth rate increases the intrinsic value increases as long as the required rate of return is greater than the growth rate.
	As the growth rate decreases the intrinsic value increases as long as the required rate of return is greater than the growth rate.

	As the current dividend increases the intrinsic value decreases
	As the current dividend decreases the intrinsic value increases