The stock of NorthPoint Corporation is currently selling for $10 per share. Earnings per share in the coming year are expected to be $2. The company has a policy of paying out 50% of its
earnings each year in dividends. The rest is retained and invested in projects that earn a 20% rate
of return per year. This situation is expected to continue indefinitely.
a. Assuming the current market price of the stock reflects its intrinsic value as computed using
the constant-growth discounted dividend model (DDM), what rate of return do NorthPoint’s
investors require?
b. By how much does its value exceed what it would be if all earnings were paid as dividends
and nothing were reinvested?
c. If NorthPoint were to cut its dividend payout ratio to 25%, what would happen to its stock
price?
d. What if NorthPoint eliminated the dividend

An attorney came to work on a saturday. when he signed in, he was advised by the morning security guard employed by the building management that he must be out of the building by 5 p.m., when it closes. however, he stayed past 5 p.m. to complete a brief that had to be filed on monday morning. at 5: 15 p.m., the afternoon security guard set the locks on all the doors of the building and left. because she was in a hurry, she did not check the sign-in sheet to make sure that everyone had signed out, contrary to mandatory procedures. when the attorney tried to exit 15 minutes later, he discovered that the doors were all locked and could not be opened from the inside. he used his cell phone to call for , and a supervisor from the building arrived and let him out shortly thereafter. if the attorney sues the building management for false imprisonment, is he likely to win?