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Question 10 (15 points) GMS paid a dividend of $1.55 today. It is expected that the dividend would grow at 6% annually till forever. a.
Question 10 (15 points) GMS paid a dividend of $1.55 today. It is expected that the dividend would grow at 6% annually till forever. a. If the price of the stock is $250 (after today's dividend payment), what is the required return, dividend yield and capital Gains yield of this stock? b. If the stock price is $250 today, what is the stock price one year later? Two years later? Four years later? c. Suppose GMS want to undertake on a large investment project and so they will stop distributing shares for the coming four years. The dividend payments in the later years will be the same as in (a) and (b). What will the stock price today be instead? d. Due to some financial difficulty, GMS announce that instead of dividends growing at 6%, the dividend would now remain constant at $1.55 forever, what is the price of the stock today
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