Answered step by step
Verified Expert Solution
Question
1 Approved Answer
1. Historical dividends for four companies are given in the following table: Dividend Year Company 1 Company 2 Company 3 Company 4 2013 $0.60 $0.70
1. Historical dividends for four companies are given in the following table: Dividend Year Company 1 Company 2 Company 3 Company 4 2013 $0.60 $0.70 $1.20 $1.00 2014 $0.70 $0.77 $1.14 $1.20 2015 $0.80 $0.85 $1.08 $0.90 2016 $0.90 $0.93 $1.03 $1.10 2017 $1.00 $1.02 $0.98 $1.00 Required Return 10% 16% 12% 14% a) Calculate the compound average annual growth rate of the dividend for each company. If you expect the dividend to grow at that rate in the future, what is the price at which you would be willing to buy these companies' stocks? b) Calculate the arithmetic average annual growth rate of the dividend for each company. If you expect the dividend to grow at that rate in the future, what is the price at which you would be willing to buy these companies' stocks? c) Use the TREND function to calculate the dividend growth rate of each company. If you expect the dividend to grow at that rate in the future, what is the price at which you would be willing to buy these companies' stocks? 1. Historical dividends for four companies are given in the following table: Dividend Year Company 1 Company 2 Company 3 Company 4 2013 $0.60 $0.70 $1.20 $1.00 2014 $0.70 $0.77 $1.14 $1.20 2015 $0.80 $0.85 $1.08 $0.90 2016 $0.90 $0.93 $1.03 $1.10 2017 $1.00 $1.02 $0.98 $1.00 Required Return 10% 16% 12% 14% a) Calculate the compound average annual growth rate of the dividend for each company. If you expect the dividend to grow at that rate in the future, what is the price at which you would be willing to buy these companies' stocks? b) Calculate the arithmetic average annual growth rate of the dividend for each company. If you expect the dividend to grow at that rate in the future, what is the price at which you would be willing to buy these companies' stocks? c) Use the TREND function to calculate the dividend growth rate of each company. If you expect the dividend to grow at that rate in the future, what is the price at which you would be willing to buy these companies' stocks
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started