Investors require a 17% rate of return on Levine Company's stock (i.e., rs = 17%).
What is its value if the previous dividend was D0 = $2.50 and investors expect dividends to grow at a constant annual rate of (1) -4%, (2) 0%, (3) 5%, or (4) 11%? Do not round intermediate calculations. Round your answers to two decimal places.
(1) $
(2) $
(3) $
(4) $
please help asap!
Thank you!
Value of stock=D0*(1+g)/(r-g)
1.
=2.5*(1-4%)/(17%-(-4%))
=11.42857143
2.
=2.5*(1+0%)/(17%-0%)
=14.70588235
3.
=2.5*(1+5%)/(17%-5%)
=21.875
4.
=2.5*(1+11%)/(17%-11%)
=46.25
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