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Constant growth stocks Super Carpeting Inc. ( SCI ) just paid a dividend ( D 0 ) of $ 2 . 8 8 per share,
Constant growth stocks
Super Carpeting Inc. SCI just paid a dividend of $ per share, and its annual dividend is expected to grow at a constant rate of per year. If the required return on SCI's stock is then the intrinsic value of SCI's shares is 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.:
If SCI's stock is in equilibrium, the current expected dividend yield on the stock will be
SCI's expected stock price one year from today will be per share.
If SCI's stock is in equilibrium, the current expected capital gains yield on SCI's stock will be per share.
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