Question
37. Bugatti, Inc is expected to pay a dividend of $2.56 exactly one year from today (i.e., D1 = 2.56) and its current stock price
37. Bugatti, Inc is expected to pay a dividend of $2.56 exactly one year from today (i.e., D1 = 2.56) and its current stock price is $48.84. The required rate of return for the companys stock is 11%. If the market expects Bugattis dividends to grow at a constant rate forever, then the growth rate must be _____%.
38. If shares of common stock of the Samson Co. offer an expected total return of 15% and if the growth rate in future dividends of the stock are expected to be 3% per year forever, what is the stocks dividend yield (i.e., D1/P0)?
39. The stock of Cabbor, Incorporated is trading at $70.00 per share. The company just paid a dividend of $5.00 per share (that is, D0 = 5.00). The growth rate in dividends is projected to be 6 percent per year forever. What is Cabbors cost of equity capital (that is, compute the required rate of return on the stock)?
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