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Eagle Industries has pulled off a miraculous recovery. Four years ago, it was near bankruptcy. Today, it announced a $1 per share dividend to be
Eagle Industries has pulled off a miraculous recovery. Four years ago, it was near bankruptcy. Today, it announced a $1 per share dividend to be paid a year from now, the first dividend since the crisis. Analysts expect dividends to increase by $1 a year from another 2 years. After the third year in which dividend are $3 per share) dividend growth is expected to settle down to a more moderate long-term growth of 6 percent. (a) If the firm's investors expect to earn a return of 14 percent on this stock, calculate the share price of Eagle Industries today. (b) If the investor required rate of return decrease to 10 percent, will you purchase the share of Eagle. (c) Based on the answer in (a) and (b), what is the relationship between share price and required rate return
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