Question
Golden Manufacturing Company is expected to pay a dividend of $8 per share of common stock in one year. The dollar amount of the dividends
Golden Manufacturing Company is expected to pay a dividend of $8 per share of common stock in one year. The dollar amount of the dividends is expected to grow at a constant 3 percent per year in future years. The required rate of return from shares of similar common stock in the present environment is 14 percent. a. What would you expect the current market price of a share of Golden common stock to be? b. Assuming the cash dividend amount and the growth rate are accurate, what is the annual rate of return on your investment in Golden common stock if you purchased shares at the stocks actual listed price of $65 per share?
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