Exam 8: Valuing Stockspart

Stock Index Performance On November 27,2007,The Dow Jones Industrial Average closed at 12,958.44,which was up 215.04 that day.What was the return (in percent)of the stock market that day?

A firm is expected to pay a dividend of $2.00 next year and $3.75 the following year.Financial analysts believe the stock will be at their price target of $125.00 in two years.Compute the value of this stock with a required rate of return of 15 percent.

Variable Growth A fast growing firm recently paid a dividend of $1.00 per share.The dividend is expected to increase at a 25 percent rate for the next three years.Afterwards,a more stable 8 percent growth rate can be assumed.If a 10 percent discount rate is appropriate for this stock,what is its value?