Question
1.A stock sells for $50. The next dividend will be $5 per share. If the rate of return earned on reinvested funds is a constant
1.A stock sells for $50. The next dividend will be $5 per share. If the rate of return earned on reinvested funds is a constant 12% and the company reinvests a constant 50% of earnings in the firm, what must be the discount rate? (Do not round your intermediate calculations. Enter your answer as a whole percent.)
2.Rework Table 7.4 for horizon years 1, 2, 3, and 10, assuming that investors expect the dividend and the stock price to increase at only 6% a year and that each investor requires the same 12% expected return. The company will pay a dividend of $1.50 at the end of the first year. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
horizon | PV dividends | PV price |
1 | ||
2 | ||
3 | ||
10 |
Value per share?
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