Assume that Globeworks is a constant growth company whose last dividend was $1.70 and whose dividend...

Assume that Globeworks is a constant growth company whose last dividend was $1.70 and whose dividend is expected to grow indefinitely at a 5.20% rate. What is the firm's expected dividend stream over the next 4 years? What is its current stock price? Assume a expected rate of return of 8.80%.

a) What are the expected dividend yield, the capital gains yield, and the total return during the first year?

b) Now assume that the stock is currently selling at $27.50. What is its expected rate of return?

c) What would the stock price be if its dividends were expected to have a growth rate of 0.60%?

Expert Solution

jeff jeffy answered 1 year ago

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