Mike works for a prominent technology company. His company just paid a $1.50 dividend per share. The required return for his company’s stock is 12%.
(Input all answers as positive values, no commas, with no symbols ex. no $ or %. Input all % answers as whole numbers without symbols ex. 10.03 for .1003. Input all final answers two decimal places out.)
22. Mike’s company has decided to increase the company’s dividend by 6% forever, on an annual basis starting with the next dividend. If this is the case, what will the value of the dividend be in year 8? (Hint: D0=$1.50; g=6%)
Given the growth information from problem 22 and the required rate of return of 12%, what is the price of the stock today? (Hint: Constant Dividend Growth Stock; D0=$1.50)
D0 = $1.50
Growth Rate = 6%
D8 = 1.50(1.06)8 = $2.39
Using Constant Growth Model,
Stock Price = 1.50(1.06)/(0.12 - 0.06)
Stock Price = $26.50
Mike works for a prominent technology company. His company just paid a $1.50 dividend per share....
. Mike works for a prominent technology company. His company just paid a $1.50 dividend per share. The required return for his company’s stock is 12%. A. If the dividend that Mike’s company just paid is a perpetual dividend, what is the price of the stock today? (Hint: Zero-growth Dividend Stock) B.(QUESTION 22) Mike’s company has decided to increase the company’s dividend by 6% forever, on an annual basis starting with the next dividend. If this is the case, what...
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