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Constant growth and zero growth dividend valuation model Urban Drapers Inc., a draperies company, has been successfully doing business for the past 15 years. It
Constant growth and zero growth dividend valuation model Urban Drapers Inc., a draperies company, has been successfully doing business for the past 15 years. It went public eight years ago and has been paying out a constant dividend of $4.16 per share every year to its shareholders. In its most recent annual report, the company informed investors that it expects to maintain its constant dividend in the foreseeable future and that dividends are not expected to increase. If you are an investor who requires a 28.50% rate of return and you expect dividends to remain constant forever, what will be your valuation for Urban Drapers stock today? _______ Urban Drapers has a sister company named Super Carpeting Inc. Super Carpeting Inc. just paid a dividend (D_0) of $3.12, and its dividend is expected to grow at a constant rate (g) of 6.50% per year. If the required return (k_e) on Super's stock is 16.25%, what is the stock price of Super's shares? $34.08 per share $36.30 per share $19.20 per share $37.20 per share Which of the following statements is true about the constant growth model? The constant growth model implies that dividend growth remains constant from now to infinity. The constant growth model implies that dividends remain constant from now to a certain terminal year. Use the constant growth model to calculate the appropriate values to complete the following statements about Super Carpeting Inc.: bullet If Super's stock is in equilibrium (that is, where the stock pride is equal to the market value of the stock), the current expected dividend yield on the stock will be _______. bullet Super's expected stock price one year from today will be _______ per share
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