1 The earnings and dividends of MicroSun Computer Co. are expected to grow at an annual rate of 12 percent over the next 4 years and then slow to a constant growth rate of 7 percent per year. MicroSun currently pays a dividend of $0.40 per share. What is the value of MicroSun stock to an investor who requires a 12 percent rate of return?,,2 HDTV has planned on diversifying into the dual-VCR field. As a result, HDTV’s beta would rise from 1.3 to 1.8 and the expected future long-term growth rate in the firm’s earnings would increase from 12% to 14%. The expected market return, km, is 14%; the risk free rate, rf, is 8%; and the current dividend, Do, is $0.50. Should HDTV go into the dual-VCR field?,,3 Michael has $6,000 invested in Sprint with an expected return of 12.3 percent; $15,000 in Microsoft with an expected return of 18.2 percent; and $4,000 in Ford with an expected return of 10.5 percent. What is Don’s expected return on his portfolio? ,,4 Space Enterprise expects to pay an annual dividend of $0.67 next year. Dividends and earnings have been growing at a compound annual rate of 6 percent and are expected to continue growing at that rate. What is an investor’s required rate of return on Zero-Sum if the current price is $10?
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