The last dividend just paid by Quantum Inc. was $2.00. Quantum’s growth rate is

expected to be a constant 15 percent for 3 years, after which dividends are expected to

grow at a rate of 10 percent forever. Quantum’s required rate of return on equity (ks) is

14 percent. What is the current price of Quantum’s common stock?

a) $62.57

b) $57.13

c) $54.88

d) $53.04

e) $48.14

7) Analysts expect Marble Comics to pay shareholders $1.00 per share annually over the

next five years. After that, the dividend will be $1.50 annually forever. Given a

discount rate of 10%, what is the value of the stock today?

a) $13.10

b) $14.30

c) $15.20

d) $16.10

e) $17.30

8) ABC company is expected to experience a 40% annual growth rate for the next 3 years

(years 1-3) and a 25% annual growth rate for the two following years (years 4 and 5). By

the end of 5 years, ABC’s growth rate will slow to 10% percent per year indefinitely.

Stockholder require a return of 12% on ABC’s stock. The most recent annual dividend

(D0 ), which was just paid yesterday, was $5.00 per share. Calculate the value of the

stock today, based on the assumptions above.