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Problem 2 Intro A stock just paid an annual dividend of $1.3. The dividend is expected to grow by 7% per year for the next
Problem 2 Intro A stock just paid an annual dividend of $1.3. The dividend is expected to grow by 7% per year for the next 3 years. The growth rate of dividends will then fall steadily (linearly) from 7% after 3 years to 4% in year 6. The required rate of return is 12%. Attempt 1/10 for 10 pts. Part 1 What is the value of the stock if the dividend growth rate will stay 0.04 (4%) forever after 6 years? 1+ decimals Submit Part 2 Attempt 1/10 for 10 pts. In 6 years, the P/E ratio is expected to be 14 and the payout ratio to be 80%. What is the value of the stock when using the P/E ratio? 1+ decimals Submit Submit assignment
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