Question
a) Fowler, Inc., just paid a dividend of $2.55 per share on its stock. The dividends are expected to grow at a constant rate of
a) Fowler, Inc., just paid a dividend of $2.55 per share on its stock. The dividends are expected to grow at a constant rate of 3.9 percent per year, indefinitely. If investors require a return of 10.4 percent on this stock, what is the current price? What will the price be in 3 years? In 15 years?
b) Poulter Corporation will pay a dividend of $3.25 per share next year. The company pledges to increase its dividend by 5.1 percent per year, indefinitely. If you require a return of 11 percent on your investment, how much will you pay for the companys stock today?
c) Redan, Inc., is expected to maintain a constant 4.3 percent growth rate in its dividends, indefinitely. If the company has a dividend yield of 5.6 percent, what is the required return on the companys stock?
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