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This stock problem will consist of four parts. Part One: IBM stock will pay a $ 1 2 per share annual dividend in perpituity. If
This stock problem will consist of four parts.
Part One: IBM stock will pay a $ per share annual dividend in perpituity. If investors require a rate of return, what should be the price of this stock today?
Part Two: If IBM is expected to pay a $ dividend next period and dividends are expected to grow at percent annually, what should be the price of this stock today if investors require a percent rate of return?
Part Three: If IBM is expected to pay a $ dividend next period and dividends are expected to grow at at percent annually for the next two years and then fall to a constant percent annual growth rate, what should be the price of this stock today if investors require a percent rate of return?
Part Four: If IBM is currently trading at $ per share, would you recommend buing the stock under the assuptions of Part One, Part Two, or Part Three?
Please include Excel formulas
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