Inventors require a 15 rate of return on brooks sisterss stock (rs 15 ) (a) What would the value of Brooks stock be if the previous dividend was D0 $2 and if investors expect dividends to grow at a constant annual rate of (1) 5 , (2) 0 , (3) 5 , and (4) 10 (b) Using data from part a, what is the Go...

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Inventors require a 15% rate of return on brooks sisterss stock (rs = 15%). (a) What would

Question:

Inventors require a 15% rate of return on brooks sisters’s stock (rs = 15%).
(a) What would the value of Brook’s stock be if the previous was D0 = $2 and if investors expect dividends to grow at a constant annual rate of
(1) -5%,
(2) 0%,
(3) 5%, and
(4) 10%
(b) Using data from part a, what is the Gordon (constant growth) model’s value for Brooks Sister’s stock if the required rate of return is 15 % and the expected growth rate is (1) 15% or (2) 20%? Are these reasonable results? Explain.
(c) Is it reasonable to expect that a constant growth stock would have g > rs?

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...