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# FIN 534 Financial Management Class- Week 5 Midterm Exam (All Answered)

3.00%. What is the current price of the common stock?

\$29.05

\$29.05

Response

Feedback:

Rationale:

Last dividend (D0)

\$1.25

Short-run growth rate

25%

Long-run growth rate

0%

Beta

1.20

5.50%

Risk-free rate

3.00%

Required return = rs = rRF + b(RPM) =

9.60%

Year

0

1

2

3

4

25%

25%

25%

25%

Dividend

\$1.2500

\$1.5625

\$1.9531

\$2.4414

\$3.0518

Horizon value = D5/(rs − g5) =

31.7891

Total CFs

\$1.5625

\$1.9531

\$2.4414

\$34.8409

PV of the CFs

Price = Sum of PVs = \$29.05

\$1.4256

\$1.6260

\$1.8544

\$24.1461

Thursday, May 4, 2017 5:30:54 PM EDT

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