1. The Back Room just paid an annual dividend of $1.65 a share. The firm expects to pay dividends forever and to increase the dividend by 3 percent annually. What is the expected value of this stock five years from now if the discount rate is 14 percent?

a) $19.08

b) $18.52

c) $17.39

d) $17.91

e) $18.06

2. Jaime Corporation reported net income of $60 million for last year. Depreciation expense totaled $20 million and capital expenditures came to $5 million. Free cash flow is expected to grow at a rate of 6% for the foreseeable future. Lambert faces a 30 % tax rate and has a 0.40 debt to equity ratio with $200 million (market value) in debt outstanding. Lambert's equity beta is 1.20, the risk free rate is currently 4% and the market risk premium is estimated to be 7%. What is the current total value of Jaime Corporation's equity (in millions)? Pick the closest answer.

a) $1742.47

b) $1542.47

c) $935.10

d) $951.26

e) $735.10