1)
a:
Price in 1 year = 18 (1 + 10%)
Price in 1 year = $19.80
b:
Year 1 dividend = 2.75 * (1 + 10%) = 3.025
Required rate = (D1 / price) + growth rate
Required rate = (3.025 / 18) + 0.1
Required rate = 0.168056 + 0.1
Required rate = 0.2681 or 26.81%
2)
Required rate = (Perpetual cash flow / price) * 100
Required rate = (2 / 46) * 100
Required rate = 4.35%
Holtzman Clothiers's stock currently sells for $18.00 a share. It just paid a dividend of $2.75...
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