Question 33

A-F

Please show work.

a. What Is Le Cum I b. What is the expected price of the stock III Jul c. Show that the expected return, 12%, equals dividend yield plus capildi upp 33. Nonconstant Growth. Better Mousetraps has come out with an improved product, and the world is beating a path to its door. As a result, the firm projects growth of 20% per year for 4 years. By then, other firms will have copycat technology, competition will drive down profit margins, and the sustainable growth rate will fall to 5%. The most recent annual dividend was DIV, = $1 per share. (L07-2) a. What are the expected values of: (i) DIV. (ii) DIV. (1) DIV. and (iv) DIY? b. What is the expected stock price 4 years from now? The discount rate is 10%. c. What is the stock price today? d. Find the dividend yield, DIV,/PO e. What will next year's stock price, P., be? f. What is the expected rate of return to an investor who buys the stock now and sells it in 1 year