Golden Manufacturing Company is expected to pay a dividend of $8 per share of common stock in

Question:

Golden Manufacturing Company is expected to pay a dividend of $8 per share of common stock in one year. The dollar amount of the dividends is expected to grow at a constant 3 percent per year in future years. The required rate of return from shares of similar common stock in the present environment is 14 percent.

(a) What would you expect the current market price of a share of Golden common stock to be?

(b) Assuming the cash dividend amount and the growth rate are accurate, what is the annual rate of return on your investment in Golden common stock if you purchased shares at the stock’s actual listed price of $65 per share?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... 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...