Question
8. Constant growth stocks Super Carpeting Inc. (SCI) just paid a dividend (D) of $3.12 per share, and its annual dividend is expected to grow
8. Constant growth stocks
Super Carpeting Inc. (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?
The constant growth model can be used if a stocks expected constant growth rate is more than its required return.
The constant growth model can be used if a stocks expected constant growth rate is less than its required return.
Use the constant growth model to calculate the appropriate values to complete the following statements about Super Carpeting Inc.:
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. |
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