Q7:

(A) Compare the dividend discount model, the constant growth model, and the constant perpetual growth model. (1 mark)

(B) Bangla Motors will pay dividends for the next 5 years. The expected dividend growth rate for this firm is 8 percent, the discount rate is 15 percent, and the stock currently sells for $50 per share. What is the most recent dividend payment? Show your calculation. (2 marks).

(C) Suppose you want to purchase shares of TFC, Inc. Would you prefer shares of common stock or shares of preferred stock? What should you consider before determining the type of share you should purchase? (1 mark)

(D) Explain why a firm would be hesitant to reduce the growth rate of its dividends. Use the dividend growth model to answer this question. (1 mark)