Bradley Broadcasting expects to pay dividends of $1.12, $1.25, and $1.40 in one, two and three years,

Question:

Bradley Broadcasting expects to pay dividends of $1.12, $1.25, and $1.40 in one, two and three years, respectively. After that, dividends are expected to grow at a constant rate of 5% forever (so, t4 to ∞). Stocks of similar risk yield 12%.

a. What should the price of Bradley Broadcasting stock be today?

b. What is growth rate of the Bradley Broadcasting dividend during year 2?

c. How much is Bradley’s stock price expected to increase during the first year?

d. What is the expected capital gains yield on Bradley Broadcasting stock during year 8?

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...