Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

ABC's stock just paid a quarterly dividend of $1.39 per share (d0 = 1.39). ABC's dividends are expected to grow at a rate of 4%

ABC's stock just paid a quarterly dividend of $1.39 per share (d0 = 1.39). ABC's dividends are expected to grow at a rate of 4% APR compounded quarterly over the next 6 years, and then remain constant (zero-growth) forever after that point in time. Using the dividend discount model, what is the price of the stock today if the required return is 12% APR compounded quarterly?

Three months from today, a stock is expected to pay a quarterly dividend of d1 = $0.52. Using the dividend discount model, what is the price of this stock today if investors require a return of 18% APR compounded quarterly, and investors believe the dividend will forever grow at a rate of 9% APR compounded quarterly?

please answer both and show formula

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Introductory Econometrics For Finance

Authors: Chris Brooks

3rd Edition

1107661455, 9781107661455

More Books

Students also viewed these Finance questions

Question

4.4 Summarize the components of a job description.

Answered: 1 week ago