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Suppose a stock is trading at $80 per share and that it pays a dividend every year, forever. The company will pay a $2 dividend
Suppose a stock is trading at $80 per share and that it pays a dividend every year, forever. The company will pay a $2 dividend one year from today. These dividends increase every year by g%. I If the stock's expected return is 8%, what is the implied growth rate of dividendsthat is, what is g? I What would the stock price be if the dividends stayed flat at $2? I How much of the stock price today comes from the expected dividend growth?
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