The Starr Co. just paid a dividend of $1.32 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year indefinitely. Required: (a) If investors require a 14 percent return on stock, what is the current price? (Do not include the dollar sign ($). Round your answer to 2 decimal places. (e.g., 32.16)) Current price $ (b) If investors require a 14 percent return on stock, what will the price be in 13 years. (Do not include the dollar sign ($). Round your answer to 2 decimal places. (e.g., 32.16)) Price in 13 years $
As per dividend discount model = D0(1+g) / r - g
a) 1.32(1.06) / 0.14 - 0.06 = 17.49
b) 1.32(1.06)^14 / 0.14 - 0.06 = 37.30
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