help! Divided growth and payout picy homework

3. What should D (first dividend) be?

4. a) find firm's equity cost of capital using the current share price

b)find year 1 dividends then growth rate, then stock price

c) highest stock price?

3. Stock with Dividend Growth II A company considers issuing a stock today. The first dividend D will be paid in year 5 , and from then, dividends are expected to grow at 6% per year (there will be no dividends in year 1 through 4). The equity cost of capital is 8%. If the company wants to raise $30 per share today, how much should D be? 4. Payout Policy and Stock Price A company expects to have earnings of $5 per share in tho coming year. The company has been paying all of its earnings as dividends. The market expects the company to keep the same payout policy in the future. Based on the expectation. the share currently sells for $40. (a) With the current payout policy in place, there is no growth in assets, and therefore, the company's earnings will remain the same forever. Using the current share price, find the firm's equity cost of capital. (b) The company considers reducing its payout ratio and using retained carnings to expand its business. Its return on assets is constant at 15%. For each of the following payout ratios, find dividend in year 1 , growth rate in dividends, and the resulting stock price. (c) Among considered payout ratios in (b). which ratio results in the highest stock price? 3. Stock with Dividend Growth II A company considers issuing a stock today. The first dividend D will be paid in year 5 , and from then. dividends are expected to grow at 6% per year (there will be no dividends in year 1 through 4). The equity cost of capital is 8%. If the company wants to raise $30 per share today, how much should D be? 4. Payout Policy and Stock Price A company expects to have earnings of $5 per share in the coming year. The company has been paying all of its earnings as dividends. The market expects the company to keep the same payout policy in the future. Bascd on the expectation, the share currently sells for $40. (a) With the current payout policy in place, there is no growth in assets, and therefore. the company's earnings will remain the same forever. Using the current share price, find the firm's equity cost of capital. (b) The company considers reducing its payout ratio and using retained carnings to expand its business. Its return on assets is constant at 15%. For each of the following payout ratios, find dividend in year 1 . growth rate in dividends, and the resulting stock price. (c) Among considered payout ratios in (b), which ratio results in the highest stock price