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XYZ Corporation currently paid a $4.00 per share dividend on its common stock.Dividends are expected to grow forever at 4%, and investorsrequire a 15% rate
XYZ Corporation currently paid a $4.00 per share dividend on its common stock.Dividends are expected to grow forever at 4%, and investorsrequire a 15% rate of return.The management is planning to enter new, risky markets to increase its expected dividend growth.However, in response to the increased risk, the investors' required rate of return will increase to 20%.What must be the new value for the dividend growth to justify entering the new, risky markets and to keep the stock price from decreasing?
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