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April 7, 2022

Medical Corporation of America (MCA) has a current stock price of $35, and its last dividend (D0) was $2.50. In view of MCA’s strong financial position, its required rate of return is 12%.

1. Medical Corporation of America (MCA) has a current stock price of $35, and its last dividend (D0) was $2.50. In view of MCA’s strong financial position, its required rate of return is 12%. If MCA’s dividends are expected to grow at a constant rate in the future, what is the firm’s expected stock price in five years?

Choice: $43.68 Choice: $48.95 Choice: $52.10 Choice: $68.75

2. A broker offers to sell you shares of Bay Area Healthcare, which just paid a dividend of $2 per share. The dividend is expected to grow at a constant rate of 6% per year. The stock’s required rate of return is 12%. What is the expected dollar dividend at the end of three years?

Choice: $2.38 Choice: $3.12 Choice: $5.00 Choice: 12%

3. A broker offers to sell you shares of Bay Area Healthcare, which just paid a dividend of $2.50 per share. The dividend is expected to grow at a constant rate of 5% per year. The stock’s required rate of return is 12%. What would be a price for this stock?

Choice: $32.25 Choice: $37.50 Choice: $43.10 Choice: $45.65

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