1A. FIA Industries just paid a dividend of $3.5 a share (i.e., D 0 = 3.5 ). The

Question

1A. FIA Industries just paid a dividend of $3.5 a share (i.e., D0 = 3.5 ). The dividend is expected to grow 5% a year forever. What is the expected dividend per share for year 7 (i.e., D 7 )? Round your answers to two decimal places.

1B. The company's stock has a beta equal to 1.46, the risk-free rate is 4.5 percent, and the market risk premium is 5.2 percent. What is your estimate of the stock's required rate of return? Answer in a percentage without the % sign, and round it to two decimal places, i.e., 10.54 for 10.54% (or 0.1054).

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Q1 A Dividend Just paid , D0                       3.50 Growth rate , g 5% dividend per share for year 7 (i.e., D 7 ) = 3.5*(1.05)^7                       4.92 Q1B Beta, B 1.46 Market Risk premium, MRP 5.20% Risk Free Rate, Rf 4.50% Ke = Rf+ B(MRP) Ke = 4.5% + 1.46(5.2%) Ke = 4.5% + 7.59% Ke = 12.09%

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