Question
Assume that X company is a constant growth company whose last dividend was $2 and whose dividend is expected to grow indefinitely at a 5%.
Assume that X company is a constant growth company whose last dividend was $2 and whose dividend is expected to grow indefinitely at a 5%. The appropriate rate of return for this stock is 15%. a) What is the companys expected dividend stream over the next 3 years. b) What is the company current stock price? c) What is the stocks ecpected value one year from now? d) What are the expected dividend yield, the capital gain yield and the total return during the first year. e) Assume that company X is currently selling at $20. What is the expected rate of return on the stock?
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