6. A stock has just paid 56 of dividend. The dividend is expected to grow at...

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6. A stock has just paid 56 of dividend. The dividend is expected to grow at a constant rate of 9% year, and the common stock

1. A company just paid a dividend of D, = 52.00 for its stock. Companys dividend is expected to grow by 40% in the first yea

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Answer 1

Answer #1

6.

Given,

Current dividend (D0) = $6

Growth rate (g) = 9% or 0.09

Current stock price (P0) = $89

Before-tax cost of debt = 6%

Tax rate (t) = 45% or 0.45

Weight of debt = 38% or 0.38

Weight of equity = 62% or 0.62

Solution :-

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Answer 2

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