Nuclear Inc. just paid a $2.75 dividend. Dividends are expected to grow by 30% in year 1, by 25% in year 2, and by 25% in year 3. After this, dividends are expected to grow at constant rate of 5% per year. If the required return for this stock is 9%, how much should the stock sell for today

$124.58  

Explanation:

Year 1 dividend=$2.75*(1+30%)=3.575

Year 2 dividend =3.575 *(1+25%)=4.46875

Year 3 dividend=4.46875 *(1+25%)=5.5859375

Termina value=Year 3 dividend*(1+constant growth rate)/(required return-constant growth rate)

Termina value=5.5859375 *(1+5%)/(9%-5%)=146.6308594

stock price=3.575 /(1+9%)^1+4.46875 /(1+9%)^2+5.5859375 /(1+9%)^3+146.6308594 /(1+9%)^3

stock price=$124.58  

the answer is "b.the increased supply will create a surplus. "

the essential thought behind price controls is straightforward - utilize the power of law to modify the equilibrium of a market. for instance, the legislature may choose that the steel business needs to survive, and in this way pass a law to set a value floor on steel. this implies all steel sold must offer at or over the floor value, which must be set over the equilibrium cost for it to have any impact. the switch could likewise happen - the administration can choose that steel is excessively costly and set a value roof underneath its equilibrium value, with the goal that all steel must be sold at or beneath that ceiling.