Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Mack Industries just paid a dividend of $1.00 per share (i.e., D0 = $1.00). Analysts expect the company's dividend to grow 30 percent this year,
Mack Industries just paid a dividend of $1.00 per share (i.e., D0 = $1.00). Analysts expect the company's dividend to grow 30 percent this year, and 20 percent in second year. After two years the dividend is expected to grow at a constant rate of 5 percent. The risk free rate is 5% and expected market risk premium is 7% and the firm is twice as risky as market. First calculate the current stock price using Excel. If the target price of the company's stock is $30.00, what should the expected stable constant growth rate after two years?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started