Assume that SL is a constant growth company whose last dividend (D0), which was paid yesterday)...
Assume that SL is a constant growth company whose last dividend (D0), which was paid yesterday) was $4.00, and whose dividend is expected to grow indefinitely at a 4 percent rate. Assume the required rate of return for SL is 13%, (Different from your estimate of 1 above)
- What is the firm's expected dividend stream over the next 3 years?
- What is the firm's current stock price?
- What is the stock's expected value 1 year from now?
- What is the expected dividend yield, the capital gains yield, and the total return during the first year?
Now assume that the stock is currently selling at $36.29, no other changes.
- What is the expected rate of return on the stock?
- What would the stock price be if its dividends were expected to have zero growth?
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