Question
All the questions below are linked together. How do I solve for number 4 (I think we solve for fair price correct me if I
All the questions below are linked together. How do I solve for number 4 (I think we solve for fair price correct me if I am wrong)? The Answer to each part is bold and in "( ) ". I am not able to get 24.66 in 4.
1.Last year Trumpco paid a 2.30 per share dividend. The beta is 2.1, the market is expected to earn 10%, and the risk free rate is 3%. If dividends remain at 2.30 per year forever, what is a fair price? (12.99)
2.What if Trumpco's dividends grow at 6% per year forever? (20.84)
3.Find the dividend yield and capital gains yield for the stock in number 2. (.117 and .06)
4.What if Trumpco's dividends grow at 4% for one year, than at 8% forever after that? (24.66)
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