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Question 2A

Question 2B

Question 2C

Valuation of a declining growth stock Martell Mining Company's ore reserves are being depleted, so its sales are falling. Also, because its pit is getting deeper each year, its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 4% per year. If Do = $3 and rs = 10%, what is the value of Martell Mining's stock? Round your answer to two decimal places. Valuation of a constant growth stock A stock is expected to pay a dividend of $3.00 the end of the year (that is, D1 = $3.00), and it should continue to grow at a constant rate of 7% a year. If its required return is 15%, what is the stock's expected price 3 years from today? Round your answer to two decimal places. $ Nonconstant growth Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $1.25 coming 3 years from today. The dividend should grow rapidly - at a rate of 39% per year - during Years 4 and 5; but after Year 5, growth should be a constant 10% per year. If the required return on Microtech is 17%, what is the value of the stock today? Round your answer to the nearest cent. $

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