Question
Suppose you are faced the following situation: you decide to buy companys share which is going to pay an annual dividend of $5 and promising
Suppose you are faced the following situation: you decide to buy companys share which is going to pay an annual dividend of $5 and promising the growth rate of 5%; You have estimated risk of the company and decided that required rate of return should be 10%. Another investor Anna estimated her return as 12%, since she thought that you are too optimistic regarding companys growth rate. Annas colleague George is also interested in purchasing of stock, so he looked on market price and Annas suggestion and decided to require something in middle- 11%. What will be the market price for stock? What you can learn from this example?
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