Question
1.) a. - A stock has never before paid a dividend but is expected to make its first dividend payment in 5 years. If the
1.) a. - A stock has never before paid a dividend but is expected to make its first dividend payment in 5 years. If the first dividend payment is expected to be $3 and dividends are expected to grow at 6%, what is the stock expected to be worth four years from now if investors require a 12% return?
b. - What is the stock worth today?
c. - What is the stock expected to be worth in 7 years?
2.) a. - A stock is expected to pay a $5 dividend next year. After that, the dividend is expected to grow by 20%, 15%, and 10% for the following 3 years, respectively, before settling into a long term growth rate of 5%. What is the stock worth four years from today if investors require a 10% return?
b. - What is the stock worth today?
c. - What is the stock expected to be worth in 8 years?
d. - What is the stock expected to be worth one year from today?
Please show all work, Thanks!
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