Question
Hamilton Landscapings dividend growth rate is expected to be 30% in the next year, drop to 15% from Year 1 to Year 2, and drop
Hamilton Landscapings dividend growth rate is expected to be 30% in the next year, drop to 15% from Year 1 to Year 2, and drop to a constant 5% for Year 2 and all subsequent years. Hamilton has just paid a dividend of $2.50, and its stock has a required return of 11%. a. What is Hamiltons estimated stock price today? b. If you bought the stock at Year 0, what are your expected dividend yield and capital gains for the upcoming year? c. What are your expected dividend yield and capital gains for the second year (from Year 1 to Year 2)? Why arent these the same as for the first year?
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