Question
1. a) Blue Water Tours just paid an annual dividend of $1.20 a share. The firm has a policy of increasing dividend by 3.8 percent
1. a) Blue Water Tours just paid an annual dividend of $1.20 a share. The firm has a policy of increasing dividend by 3.8 percent annually. What is the current value of the stock at a discount rate of 12.5percent?
b) The room just paid an annual dividend of $1.68 a share. The firm expects to pay dividends forever and to increase the dividend by 4 percent annually. What is the expected value of this stock five years from now if the rate is 15percent?
2. Quality Home Made ice cream has plans to pay decreasing annual dividends of $1.50, $1.25, and $1.00 over the next three years, respectively. After that, the firm will increase the dividend by 4 percent each year. What is the value of this stock today at a discount rate of 9 percent?
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