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1. A) Suppose the risk-free rate is 3.00% and an analyst assumes a market risk premium...

1. A) Suppose the risk-free rate is 3.00% and an analyst assumes a market risk premium of 7.64%. Firm A just paid a dividend of $1.03 per share. The analyst estimates the β of Firm A to be 1.33 and estimates the dividend growth rate to be 4.74% forever. Firm A has 262.00 million shares outstanding. Firm B just paid a dividend of $1.61 per share. The analyst estimates the β of Firm B to be 0.87 and believes that dividends will grow at 2.69% forever. Firm B has 181.00 million shares outstanding. What is the value of Firm A?

B) Suppose the risk-free rate is 3.50% and an analyst assumes a market risk premium of 6.68%. Firm A just paid a dividend of $1.11 per share. The analyst estimates the β of Firm A to be 1.25 and estimates the dividend growth rate to be 4.91% forever. Firm A has 296.00 million shares outstanding. Firm B just paid a dividend of $1.51 per share. The analyst estimates the β of Firm B to be 0.74 and believes that dividends will grow at 2.85% forever. Firm B has 200.00 million shares outstanding. What is the value of Firm B?

A bank offers 6.00% on savings accounts. What is the effective annual rate if interest is compounded quarterly?

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