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Hello, kindly help me solve this problem about Common stock yield. (7-15) You buy a share of The Ludwig Corporation for $ 21.40; the company
Hello, kindly help me solve this problem about Common stock yield.
(7-15) You buy a share of The Ludwig Corporation for $ 21.40; the company expects to pay dividends of $ 1.07, $ 1.1449 in year 2, and $ 1.2250 at the end of years 1, 2, and 3, respectively, and sell it for $ 26.22 after three years.
- Calculate the growth rate of dividends.
- Calculate the expected return on dividends.
- Assuming the calculated growth rate is stable, you can add the dividend yield to the growth rate to get the total future rate of return. What is the total expected rate of this share?
Reference book:
Corporate Finance: A Focused Approach by Ehrhardt and Brigham Second Edition
Thanks!
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