21 points. Thomas Brothers just paid a $6.00 per share annual dividend. The dividend is expected to grow forever at...

Question

Question

Answer 1

Answer #1

rate positively..


Ans a)	Value of stock = Expected dividend next year/(required rate - growth rate)

		6*103%/(11%-3%)
		77.25

Ans b)	If the current stock price is $72.7 than stock should be bought.
	Therefore we will be buyer of the stock as its lower than the intrinsic value of the share computed in a)

Answer 2

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