Question
1a. Far Side Corporation is expected to pay the following dividends over the next four years: $10, $13, $7, and $3. Afterward, the company pledges
1a. Far Side Corporation is expected to pay the following dividends over the next four years: $10, $13, $7, and $3. Afterward, the company pledges to maintain a constant 0.07 growth rate in dividends forever. If the required return on the stock is 0.15, what is the current share price? Answer with 2 decimals (e.g. 45.45).
b. E-Eyes.com Bank just issued some new preferred stock. The issue will pay a $2 annual dividend in perpetuity, beginning 9 years from now. If the market requires a 0.07 return on this investment, how much does a share of preferred stock cost today? Enter the answer with 2 decimals (e.g. 45.45).
c. Suppose you know a company's stock currently sells for $31 per share and the required return on the stock is 0.09. You also know that the required return is evenly divided between the capital gains yield (G) and the dividend yield (D1/P0) (this means that if the required retun is 9%, the capital gains yield is 4.5% and the dividend yield is 4.5%).If it's the company's policy to always maintain a constant growth rate in its dividends, what is the next dividend per share? Answer with 2 decimals (e.g. 1.23)
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