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Q4. New generation Studio Inc. paid $2.30 per share annual dividend last week. Dividends are expected to increase by 4.65 percent annually. What is one
Q4. New generation Studio Inc. paid $2.30 per share annual dividend last week. Dividends are expected to increase by 4.65 percent annually. What is one share of this stock worth to you today if your required rate of return is 14 percent? f Hint: This amounts to a Nonconstant growth in dividend} Q5. KMT Manufacturing Company made two announcements concerning its common stock today. First, the company announced that the next annual dividend will be $1.64 a share. Secondly. all dividends after that will decrease by 1.45 percent annually. What is the maximum amount you should pay to purchase a share of this stock today if you require a 12% rate of return? f Hint: if the dividend grows at a steady rate, g. then the purchase price can be written as as Constant Growth Case as follows: Pa = DI/Rg where DI future dividends , R =Reauired rate of growth, r steady growth rate. Please note that the growth rate Fr HHI'FJ'IHI ha 'I
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