Question
1. A firm recently paid a dividend of $7/share. Over the next 15 years, they will maintain their dividend at $7/share. Then afterwards, they will
1. A firm recently paid a dividend of $7/share. Over the next 15 years, they will maintain their dividend at $7/share. Then afterwards, they will change their dividends to grow at a constant 6%/year every year, forever. %.
a. How much dividend is paid in year 31?
b. What is the stock price?
2. A stock will pay the following dividends: $5 in year 1, $6 in year 2, $7 in year 3. After year 3, they will maintain a zero growth dividend policy. %. Find the stock price.
3. A firm has a zero growth dividend policy and recently paid $2/share. Next year, they will pay an abnormally large dividend payment of $10/share. Afterwards, they will continue to pay their constant dividend payments of $2/share. %. Find the stock price
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