4. Constant growth stocks

SCI just paid a dividend (D) of $3.12 per share, and its annual dividend is expected to grow at a constant rate (g) of 6.50% per year. If the required return (rss) on SCIs stock is 16.25%, then the intrinsic value of SCIs shares is ______ per share.

Which of the following statements is true about the constant growth model?

A. The constant growth model can be used if a stocks expected constant growth rate is less than its required return.

B. The constant growth model can be used if a stocks expected constant growth rate is more than its required return.

Use the constant growth model to calculate the appropriate values to complete the following statements about Super Carpeting Inc.: (Note: Do not round your intermediate calculations.)

	If SCIs stock is in equilibrium, the current expected dividend yield on the stock will be ____ per share.
	SCIs expected stock price one year from today will be ____ per share.
	If SCIs stock is in equilibrium, the current expected capital gains yield on SCIs stock will be ____ per share.