a. Computer stocks currently provide an expected rate of return of 16%. MBI, a large computer company,
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a. Computer stocks currently provide an expected rate of return of 16%. MBI, a large computer company, will pay a year-end dividend of $2 per share. If the stock is selling at $50 per share, what must be the market’s expectation of the dividend growth rate?
b. If dividend growth forecasts for MBI are revised downward to 5% per year, what will happen to the price of MBI stock?
c. What (qualitatively) will happen to the company’s price–earnings ratio? P-69
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Related Book For
ISE Investments
ISBN: 9781266085963
13th International Edition
Authors: Zvi Bodie, Alex Kane, Alan Marcus
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