Answered step by step
Verified Expert Solution
Question
1 Approved Answer
At the beginning of the year, GDL was considered a mature company and everyone expected its dividend to grow at a constant rate of 2.6%
At the beginning of the year, GDL was considered a mature company and everyone expected its dividend to grow at a constant rate of 2.6% per year, and everyone also expected the company would pay a dividend of $3.6 exactly one year from now. The required return for the company is 11% Suppose that at the end of the year, the company pays the expected dividend amount, but some unexpected good news about the company is revealed, and everyone now expects the company to grow at a constant rate of 7% per year forever. If you bought the company at the beginning of the year and then sold it at the end of the year (after collecting the dividend and after the good news was revealed), what was your 1-year return on your investment in GDL stock? Enter your answer in decimals (not percent) and round to 4 decimal places, for example 0.1234. At the beginning of the year, GDL was considered a mature company and everyone expected its dividend to grow at a constant rate of 2.6% per year, and everyone also expected the company would pay a dividend of $3.6 exactly one year from now. The required return for the company is 11% Suppose that at the end of the year, the company pays the expected dividend amount, but some unexpected good news about the company is revealed, and everyone now expects the company to grow at a constant rate of 7% per year forever. If you bought the company at the beginning of the year and then sold it at the end of the year (after collecting the dividend and after the good news was revealed), what was your 1-year return on your investment in GDL stock? Enter your answer in decimals (not percent) and round to 4 decimal places, for example 0.1234
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started