a) growth rate (g) = - 5%, r = 10%, D1 = $6
Value of share = D1 / (r - g) = $6 / [10% - (-5%)] = $40.00
b) D2 = D1 x (1 + g) = $6 x (1 - 5%) = $5.70
Stock price next year = D2 / (r - g) = $5.70 / [10% - (-5%)] = $38.00
c) rate of return = [ Dividend + (Stock price next price - Value of share today) / Value of share today ] x 100
or, rate of return = [ { $6 + ($38 - $40) } / $40 ] x 100 = 10.00%
Help please add formula Saved Horse and Buggy Inc is in a declining industry sales, earnings,...
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