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1. The risk-free rate, rRF, is 6%. The overall stock market has an expected return of 12%. Hazlett, Inc. has a beta of 1.2. What is the required return of Hazlett, Inc. stock?
2. A stock has a required return of 12.25%. The beta of the stock is 1.15 and the risk-free rate is 5%. What is the market risk premium?
3. Partridge Plastic's stock has an estimated beta of 1.4, and its required return is 13%. Cleaver Motors' stock has a beta of 0.8, and the risk-free rate is 6%. What is the required return on Cleaver Motors' stock?
4. Hahn Manufacturing is expected to pay a dividend of $1.00 per share at the end of the year (D1 = $1.00). The stock sells for $40 per share, and its required rate of return is 11%. The dividend is expected to grow at a constant rate, g, forever. What is Hahn's expected growth rate?
5. The Ehrhardt Company's last dividend was $2.00. The dividend growth rate is expected to be constant at 3% for 2 years, after which dividends are expected to grow at a rate of 8% forever. Erhardt's required return (rs) is 12%. What is Erhardt's current stock price?
6. If a stock's expected return exceeds its required return, this suggests that
7. If a stock's dividend is expected to grow at a constant rate of 5% a year, which of the following statements is CORRECT?
8. Which of the following statements is CORRECT?
9. Companies can issue different classes of common stock. Which of the following statements concerning stock classes is CORRECT?
10. A stock is not expected to pay a dividend over the next four years. Five years from now, the company anticipates that it will establish a dividend of $1.00 per share (i.e., D5 = $1.00). Once the dividend is established, the market expects that the dividend will grow at a constant rate of 5% per year forever. The risk-free rate is 5%, the company's beta is 1.2, and the market risk premium is 5%. The required rate of return on the company's stock is expected to remain constant. What is the current stock price?