Part 1: At zero growth of dividend, Current Price of stock P0 as
P0 = D/R where D is the constant dividend and R is the rate of return.
P0 = 0.49 / 9.52% = 0.49 / 0.0952 = $ 5.15
Part 2 : ABC's dividend yield = Annual dividend / Current stock price = 0.49 / 5.15 = 0.09514 = 9.514 %
Part 3 : Quarterly discount rate(R1/4)= 9.52% / 4 = 2.38%
Part 4 : At constant growth of dividend quarterly, Current price stock P1/4 = D1/4 / R1/4 = 0.49 / 2.38% = $ 20.6
Part 5 : Intrinsic value of stock P =D t+1 / R - g Where R is the discoun rate ,g is the growth rate of dividend.
= 0.49 / (2.38% - 0.6%) = 0.49/ 1.78% = $ 27.5
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