Reference no: EM132672005

Problem 1: Maxwell 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 10% per year. If D0 = $6 and rs = 12%, what is the value of Maxwell Mining's stock? Round your answer to the nearest cent.

Problem 2: A stock is expected to pay a dividend of $0.75 at the end of the year (i.e., D1 = $0.75), and it should continue to grow at a constant rate of 5% a year. If its required return is 13%, what is the stock's expected price 3 years from today? Do not round intermediate calculations. Round your answer to the nearest cent.

Problem 2: Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $2.00 coming 3 years from today. The dividend should grow rapidly-at a rate of 44% per year-during Years 4 and 5; but after Year 5, growth should be a constant 10% per year. If the required return on Computech is 17%, what is the value of the stock today? Do not round intermediate calculations. Round your answer to the nearest cent.