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1.

Acme Corp. just paid a dividend of $3.00 per share (ie., D0 = $3.00).  The dividend is expected to grow at a constant rate of 4% per year.  What is the expected dividend at the end of year three (D3)? 

2. 

The last dividend paid by Klein Company was $1.00.  Klein's growth rate is expected to be a constant 5 percent for 2 years, after which dividends are expected to grow at a rate of 10 percent forever.  Klein's required rate of return on equity (rs) is 12 percent.  What is the current price of Klein's common stock?

3.
Calculate the required rate of return for Mars Inc.’s stock.  The Mars' beta is 1.2, the rate on a T-bill is 4 percent, the expected return on the market is 11.5 percent.




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