1. You are evaluating the potential purchase of a small business currently generating$42,500 of after-tax cash flow. On the basis of a review of similar-risk investment opportunities, you must earn an 18% rate of return on the proposed purchase.Estimate the firm'svalues if cash flows areexpected to grow at a constant annual rate of 7% from now to infinity?

1. The Belgium Bike Company just paid an annual dividend of $1.12. If you expect a constant growth rate of 4% and have a required rate of return of 13%, what is the current stock price according to the constant growth dividend model?

1. Perry Motors' common stock just paid its annualdividend of $1.80 per share. The required return on the common stock is 12%.Estimate the value of the common stockif dividends are expected to grow at a constant annual rate of 5% to infinity.

1. Jones Design wishes to estimate the value of its outstanding preferred stock. The dividendis expected to remain constant at $6.40per share forever.Similar-risk preferred stocks are currentlyearning a 9.3% annual rate of return. Calculate is the stock's valueper share.