Question
Burp-Cola just finished making an annual dividend payment of $2.- per share on its common stock. Its common stock dividend has been growing at an
Burp-Cola just finished making an annual dividend payment of $2.- per share on its common stock. Its common stock dividend has been growing at an annual rate of 10% . Kelly Scott requires a 16% on this stock. What intrinsic value should Kelly place on one share of Burp - Cola common stock under the following three situations?
a) dividends are expecting to continue growing at a constant 1% annual rate.
b) The annual dividend growth rate is expected to decrease to 9% and to remain constant at that level.
c) The annual dividend growth rate is expected to increase to 11% and to remain constant at the level.
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