Question
Mcafee Co. is growing quickly. Dividends are expected to grow at a 25 percent rate for the next three years, with the growth rate falling
Mcafee Co. is growing quickly. Dividends are expected to grow at a 25 percent rate for the next three years, with the growth rate falling off to a constant 7 percent thereafter. The required return is 12 percent and the company just paid a $2.40 dividend. a) What are the expected values of DIV1, DIV2, DIV3, and DIV4? b) What is the expected stock price three years from now? c) What is the stock price today? d) Find the dividend yield, DIV1/P0. e) What will next years stock price, P1, be? f) What is the expected rate of return to an investor who buys the stock now and sells it in one year? (Written answer)
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