1. If a certain corporation just recently paid a dividend of $3.70, and the dividend is...

1. If a certain corporation just recently paid a dividend of $3.70, and the dividend is expected to grow at 4% for a long time into the future, calculate the price of this company’s stock at required returns of 8%, 10% and 12%. Then using a 10% required return, calculate the price at growth rates of 2%, 5% and 8%. Discuss what you see in the behavior of the prices in response to changes in the growth rate and changes in the required return. Using the price you calculated with a 4% growth rate and a 10% required return, what would be the expected dividend and price five years from today?

Expert Solution

jeff jeffy answered 9 months ago

If a certain corporation just recently paid a dividend of $3.70, and the dividend is expected...

If a certain corporation just recently paid a dividend of $3.70, and the dividend is expected to grow at 4% for a long time into the future, calculate the price of this company’s stock at required returns of 8%, 10% and 12%. Then using a 10% required return, calculate the price at growth rates of 2%, 5% and 8%. Discuss what you see in the behavior of the prices in response to changes in the growth rate and changes in...

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