Question

3.The stock in Up-Towne Movers is selling for $47.20 per share. Investors have a required return of 9.8 percent and expect the dividends to grow at 4.1 percent indefinitely. What was the dividend the company just paid?

4.CDB stock is currently priced at $72. The company will pay a dividend of $4.25 next year and investors require a return of 10.4 percent on similar stocks. What is the dividend growth rate on this stock?

Answer 1

1.
=Current Price*(required return-growth rate)/(1+growth rate)
=47.20*(9.8%-4.1%)/(1+4.1%)
=2.58444

2.
=Required return-Expected Dividend/Current Price
=10.4%-4.25/72
=4.50%