1. A company just paid a dividend of D= 2.50 for its stick. Company’s dividend is expected to grow by 70% in the first year, by 30% in the second year, by 12% in the third year and at a constant rate of 5% in year 4 and thereafter. The required return in this stock is 20%. What is the sticks current value?
2. A stock has just paid a $6 of dividend. The dividend is expected to grow at a constant rate of 7% a year, and the common stock current sells for $57. The before-tax cost of debt is 9% ad the tax rate is 50%. The target capital structure cosists of 23% debt and 77% common equity. What is the company WACC if all the equity used is retained earnings?