Li & Sons’ common stock currently trades at $55 a share.  It…

Li & Sons’ common stock currently trades at $55 a share.  It is expected to pay an annual dividend of $1.93 a share at the end of the year (D1 = $1.93), and the constant growth rate is 10.2 percent a year.  What is the company’s cost of common equity if all of its equity comes from retained earnings?

Your client is 45 years old, and she wants to begin saving f…

Your client is 45 years old, and she wants to begin saving for retirement, with the first payment to come one year from now.  She can save $3,000 per year, and you advise her to invest it in securities which you expect to provide an average annual return of 8 percent.  If she follows your advice, how much money would she have at age 65?

Mack Industries just paid a dividend of $1.00 per share (i.e…

Mack Industries just paid a dividend of $1.00 per share (i.e., D0 = $1.00). Analysts expect the company’s dividend to grow 20 percent this year (i.e., D1 = $1.20), and 15 percent next year. After two years the dividend is expected to grow at a constant rate of 5 percent. The required rate of return on the company’s stock is 12 percent. What should be the current price of the company’s stock?