Question

Miller Brothers Hardware paid an annual dividend of $1.55 per share last month. Today, the company announced that future dividends will be increasing by 3.40 percent annually. If you require a 8.7 percent rate of return, how much are you willing to pay to purchase one share of this stock today?

Teder Corporation stock currently sells for $100 per share. The market requires a 12 percent return on the firm's stock. If the company maintains a constant 6 percent growth rate in dividends, what was the most recent dividend per share paid on the stock?

Answer 1

Cost of equity = ke = D1 = 8.70% 3.40% $1.60 $30.24 1.60/(8.7% -3.4%) 1.55*1.034 Price = 01/(ke-g)