Question
Q5 (This question is not cumulative) a) Avondale Corp. pays a dividend of $3.00 per year. Analysts expect it to continue to pay this dividend
Q5 (This question is not cumulative)
a) Avondale Corp. pays a dividend of $3.00 per year. Analysts expect it to continue to pay this dividend forever. What is the price per share of Avondale stock if the required rate of return on the stock is 12%?
b) Tresnan Brothers is expected to pay a $1.80 per share dividend at the end of the year. The dividend is expected to grow at a constant rate of 4% a year. The required rate of return o the stock is 10%. What is the stock's current value per share? What is the stock's expected price 4 years form today?
c) Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $0.50 coming 4 years from today. The dividend will grow at a constant 7% per year thereafter. If the required return on Computech is 13%, what is the value of the stock today?
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