Super Carpeting Inc. (SCI) just paid a dividend (Do) of $1.68 per share, and its annual dividend is

expected to grow at a constant rate (9) of 3.50% per year. If the required return (rs) on SCI’s stock is

8.75%, then the intrinsic value of SCI’s shares. .

per share.

Which of the following statements is true about the constant growth model?

с

The constant growth model can be used if a stock’s expected constant growth rate is less than its

required return.

C

The constant growth model can be used if a stock’s expected constant growth rate is more than

its required return.

Use the constant growth model to calculate the appropriate values to complete the following

statements about Super Carpeting Inc.:

• If SCI’s stock is in equilibrium, the current expected dividend yield on the stock will

beper share.

• SCI’s expected stock price one year from today will be

.per share.

. If SCI’s stock is in equilibrium, the current expected capital gains yield on SCI’s stock will

be.

per share.