15. Miller Juice Inc. is expected to pay a $3.00 dividend next year and a $4 dividend in two years. After that dividends are expected to grow at 5% forever. If investors require a return of 12% on the investment what should Miller Juice stock sell for today? a. $60.00 b. $54.15 c. $49.39 d. $53.70 16. Miller Juice traditionally pays out 35% of its earnings as dividends. Last year Miller’s earnings available for common stockholders were $256 million and the book value of its equity was $678 million. What is Miller’s growth rate? a. 24.54% b. 35.00% c. 37.76% d. 13.22% 17. Miller Juice traditionally retains 65% of its earnings for future investments. Last year Miller’s return on equity was 15%. What is Miller’s growth rate? a. 15.00% b. 9.75% c. 5.25% d. 18.38% 18. Bavarian Sausage free cash flow for the current year is $6 750 000 and investors believe that the company’s free cash flow will grow by 5% annually forever. If Bavarian sausage’s weighted average cost of capital is 15% what is their enterprise value? a. $67 500 000 b. $85 350 000 c. $56 780 000 d. $70 875 000 19. Bavarian Sausage’s enterprise value is $75 000 000 the market value of its debt is $23 000 000 and the company does not have any preferred stock outstanding. If the company has 3 500 000 shares outstanding what should be Bavarian Sausage’s stock price? a. $21.43 b. $14.86 c. $28.00 d. $6.57 20. Bavarian Sausage’s enterprise value is $75 000 000 the market value of its debt is $23 000 000 and the market value of its preferred stock is $5 000 000. If the company has 3 500 000 shares outstanding what should be Bavarian Sausage’s stock price? a. $14.86 b. $21.43 c. $13.43 d. $6.57 21. Bavarian Sausage is expected to pay a $1.57 dividend next year . If the required return on the stock investment is 14% and the stock currently sells for $34.37 what is the implied dividend growth rate for this company? a. 6.37% b. 9.43% c. 12.68% d. 15.76%
