Question
1. ABC Gym just paid its annual dividend at $3 per share, and it is widely expected that the dividend will increase by 5% per
1. ABC Gym just paid its annual dividend at $3 per share, and it is widely expected that the dividend will increase by 5% per year indefinitely.
a) What price should the stock sell at? The discount rate is 15%.
b) How would your answer change if the discount rate were only 12%? Why does the answer change?
c) What is the estimated stock price if the dividend is expected to decrease by 5% per year indefinitely and the discount rate is 15%?
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Introduction to Econometrics
Authors: James H. Stock, Mark W. Watson
3rd edition
133595420, 978-0138009007, 138009007, 978-0133486872, 133486877, 978-0133595420
