Question
Assuming Google's common stock just paid its annual dividend of $1.8 par value. The required return on the common stock is 12%. Estimate the value
Assuming Google's common stock just paid its annual dividend of $1.8 par value. The required return on the common stock is 12%. Estimate the value of common stock under each of the following assumptions about the dividend:
A. Dividends are expected to grow at an annual rate of 0% to infinity.
B. Dividends are expected to grow at a constant rate of 5% to infinity.
C. Dividends are supposed to grow at a contant annual rate of 5% for each of the next 3 years, followed by a constant growth rate of 4% in years 4 to maturity.
D. Dividends are supposed to grow at an annual rate of 15%, 12%, 10%, 8% for each of the next 4 years respectively, then grow at a constant rate of 5% in years 5 to maturity.
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