1.A company is expected to have earnings per share of $3.2 this year and to pay a...
Question:
1.A company is expected to have earnings per share of $3.2 this year and to pay a dividend of $2.4. The discount rate for the stock is 16.8% and the rate of return on reinvested earnings is 21.2%. What is the sustainable growth rate? (The sustainable growth rate is 5.3%, just use it to calculate the next question) Using 5.3 as the growth rate, what would be the price of the stock?
2.Consider a stock that will have dividends in the next three periods of $1.34, $1.57, and $1.62, respectively. The interest rate is 10%. What is the growth rate of the dividend in period 3?(the growth rate of dividend in period 3 is 3.18%, just use it to calculate the next question) If the growth rate is expected to be 3.18% indefinitely, what is the price of the stock in period 2?