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Determine the Constant Growth Valuation : Valencia Brothers expects to pay a $1.75 per share dividend at the end of the year (i.e., D 1
- Determine the Constant Growth Valuation: Valencia Brothers expects to pay a $1.75 per share dividend at the end of the year (i.e., D1=$1.75). The company expects the dividend to grow at a constant rate of 5% yearly. The required rate of return on the stock, rs, is 9%. What is the stocks current value per share? Show the formula.
- Expected Rate of Return on a Constant Growth Stock: You buy a stock for $23.50 and expect the next annual dividend to be $1.10. Furthermore, you expect the dividend to grow at a constant rate of 6%. What is the expected rate of return and dividend yield on the stock? Show the formula.
- Valuing Nonconstant Growth Stocks: A company just paid a $1.50 dividend and expects it to grow 8% for the next 3 years. After 3 years, the dividend is expected to grow at 5% indefinitely. If the required rate of return is 8%, what is the stocks value today?
provide the formulas used for questions 3, 4, and 5
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