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The question is that there is a stock that will pay dividends forever and its current...

The question is that there is a stock that will pay dividends forever and its current dividend (which you do not receive if buying today） is ＄2.4. The discount rate (EAR) is 16%.

1） what's the price of this stock.

2) here are two alternatives: First, having growth rate 1% but not until in two years; second, split up and pay dividend monthly. The first payment is in one year. Which alternative do you recommend if the company wants to increase the present value of the stock?  

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Answer #1

1. Price of stock = current dividend/ disc.rate

= 2.4/0.16

Price of stock =$15.00

2.....

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