Question

Investors require a 13% rate of return on Brooks Sisters' stock (rs = 13%). What would the estimated value of Brooks' stock be if the previous dividend was D0 = $2.25 and if investors expect dividends to grow at a constant annual rate of (1) - 2%, (2) 0%, (3) 4%, or (4) 10%? Do not round intermediate calculations. Round your answers to the nearest cent. $   $   $   $   Using data from Part a, what is the constant growth model's estimated value for Brooks Sisters' stock if the required rate of return is 13% and the expected growth rate is (1) 13% or (2) 17%? Are these reasonable results? Round your answers to the nearest cent. Use a minus sign to enter negative values, if any. If your answer is zero, enter "0". : $   -Select-Yes, it is a reasonable result.No, it is not a reasonable result, because in this case the value of stock is undefined.No, it is not a reasonable result, because in this case the value of stock is negative, which is nonsense.Item 6 : $   -Select-Yes, it is a reasonable result.No, it is not a reasonable result, because in this case the value of stock is undefined.No, it is not a reasonable result, because in this case the value of stock is negative, which is nonsense.Item 8 Is it reasonable to expect that a constant growth stock would have gL > rs? -Select-YesNoItem 9

Answer 1