Reference no: EM132797124

Questions -

1. Human Systems, a pharmaceutical company, is expected to experience a high rate of earnings and dividend growth in the next 5 years as a result of having developed a cold remedy that reduces the effects of the common cold to an average of 2 days. We expect the rate of growth in years 1 to 3 to be 20% and in years 4 and 5 to be 10%. The rate of growth in each year thereafter is expected to be 5%, and the last dividend Human Systems paid was $4.00. Stockholders' required rate of return is 8%. Using the Discounted Dividend Model, what is the intrinsic value today of Humans Systems' stock given the expected growth in dividends?

2. Your friend is planning to borrow $10,000 from a bank to purchase a used motorcycle. She is considering 3 different loans, each with different interest rates but with the same term. The loan from Bank A has an annual interest rate of 7.99% compounded quarterly. The loan from Bank B has an annual interest rate of 6.99% compounded monthly. And the loan from Bank C has an annual interest rate of 7.5% compounded semiannually. Which loan would you recommend to your friend and why?