a) Price per share = Expected dividend/Required rate of return -
growth rate
Growth rate = 5%
Required rate of return = 15%
Expected dividend = Dividend paid(1+growth rate)
= 2.59(1+5%)
= 2.59(1.05)
= 2.7195 $
Thus price per share = 2.7195/15%-5%
=2.7195/10%
=27.20 $
b) Price per share = Expected dividend/Required rate of return -
growth rate
Growth rate = 8%
Required rate of return = 13%
Expected dividend = Dividend paid(1+growth rate)
= 2.59(1+8%)
= 2.59(1.08)
= 2.7972 $
Thus price per share = 2.7972/13%-8%
=2.7972/5%
=55.94 $
c) Price per share = Expected dividend/Required rate of return -
growth rate
Growth rate = 6%
Required rate of return = 18%
Expected dividend = Dividend paid(1+growth rate)
= 2.59(1+6%)
= 2.59(1.06)
= 2.7454 $
Thus price per share = 2.7454/18%-6%
=2.7454/12%
=22.88 $
d) Price per share = Expected dividend/Required rate of return -
growth rate
Growth rate = 3%
Required rate of return = 17%
Expected dividend = Dividend paid(1+growth rate)
= 2.59(1+3%)
= 2.59(1.03)
= 2.6677 $
Thus price per share = 2.6677/17%-3%
=2.6677/14%
=19.06 $
e) Price per share = Expected dividend/Required rate of return -
growth rate
Growth rate = 9%
Required rate of return = 18%
Expected dividend = Dividend paid(1+growth rate)
= 2.59(1+9%)
= 2.59(1.09)
= 2.8231 $
Thus price per share = 2.8231/18%-9%
=2.8231/9%
=31.37 $
Management action and stock value REH Corporation's most recent dividend was $2.59 per share, its expected...
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parts; B,C,D,E
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