Question
1.A fast growth share has the first dividend (t=1) of $2.46. Dividends are then expected to grow at a rate of 5 percent p.a. for
1.A fast growth share has the first dividend (t=1) of $2.46. Dividends are then expected to grow at a rate of 5 percent p.a. for a further 2 years. It then will settle to a constant-growth rate of 1.9 percent. . If the required rate of return is 18 percent, what is the current price of the share?(to the nearest cent)
2.After paying a dividend of $1.90 last year, a company does not expect to pay a dividend for the next year. After that it plans to pay a dividend of 4.08 in year 2 and then increase the dividend at a rate of 4 percent per annum in years 3 to 6. What is the expected dividend to be paid in year 3? (to nearest cent; don't include $ sign)
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