Question
Ameritech Corporation paid dividends per share of $3.56 in 1992, and dividends are expected to grow 5.5% a year forever. The stock has a beta
Ameritech Corporation paid dividends per share of $3.56 in 1992, and dividends are expected to grow 5.5% a year forever. The stock has a beta of 0.90,
and the Treasury bond rate is 6.25%. (Risk premium is 5.5%.)
a. What is the value per share, using the Gordon growth model?
b. The stock was trading for $80 per share. What would the growth rate in dividends have to be to justify this price?
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Investment Analysis And Portfolio Management
Authors: Frank K. Reilly, Keith C. Brown
7th Edition
0324171730, 978-0324171730
