Question
A stock you're valuing paid an annual dividend of $3.70.Dividends have increased at a steady 1.4 percent over the past 15 years, and you expect
A stock you're valuing paid an annual dividend of $3.70. Dividends have increased at a steady 1.4 percent over the past 15 years, and you expect that to continue.
A. If the required rate of return for the stock is 13.8 percent, what is its fair present value?
B. If the required rate of return for the stock is 16.8 percent, what should its fair value be four years from now?
Step by Step Solution
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Step: 1
A To calculate the fair present value of the stock we can use the dividend discount model Fair Valu...
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Fundamentals Of Corporate Finance
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
5th Edition
0135811600, 978-0135811603
