Question
Consider a stock that is not planning to pay a dividend until 10 years from now. The first dividend paid (D11) will be $2. After
Consider a stock that is not planning to pay a dividend until 10 years from now. The first
dividend paid (D11) will be $2. After that, the company will maintain a constantdividend growth rate of 5% forever. The required return for this stock is 8%.
a.What is the value of the stock in 10 years?
b.What are dividend yield and capital gains yield in 10 years?
c.What is the value of the stock today?
d.What are dividend yield and capital gains yield this year?
e.What is the value of the stock in 3 years?
f.What are dividend yield and capital gains yield in 3 years?
g.What will the dividend yield be 50 years from now?
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