1. (a) StockAjust distributed a dividend of $4. It is expected that the company will increase its dividend by 18% in the coming year, 15% in the second year and 109% in the third year. After the third year, the company will maintain the dividend growth rate at 8% forever. How much would Stock A be worth today if its yearly required rate of return is 15%?. 2. (b) Suppose you are willing to pay $30 today for a share of stock which you expect to sell at the end of one year for $32. If you require an annual rate of return of 12 percent, what must be the amount of the annual dividend which you expect to receive at the end of Year 1? [Hint: think of PO = D1/ (R-
1. (a) StockAjust distributed a dividend of $4. It is expected that the company will increase its dividend by 18% in the coming year, 15% in the second year and 109% in the third year. After the third year, the company will maintain the dividend growth rate at 8% forever. How much would Stock A be worth today if its yearly required rate of return is 15%?. 2. (b) Suppose you are willing to pay $30 today for a share of stock which you expect to sell at the end of one year for $32. If you require an annual rate of return of 12 percent, what must be the amount of the annual dividend which you expect to receive at the end of Year 1? [Hint: think of PO = D1/ (R-
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter8: Basic Stock Valuation
Section: Chapter Questions
Problem 16MC
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