Question
4) VeggieStrips has been growing at a rate of 8% per year in recent years. This growth is expected to last for another 3 years,
4) VeggieStrips has been growing at a rate of 8% per year in recent years. This growth is expected to last for another 3 years, then decline to 3%. a. If D(0) = $1.60 and r(s) =10%, what is VS stock worth today? What are its expected dividend and capital gains yield at this time (year1)? b. Assume that VS period of 8% a year growth will last 6 years instead of 3. How would this affect the price, dividend yield, and capital gains yield. Answer in words only. c. What will VS dividend yield and capital gains yield be once the 8% growth ends? d. Of what interest to investors is the changing relationship between dividend and capital gains yields over time?
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