Finally, assume that Bon Tempss earnings and dividends are expected to decline at a constant rate of

Question:

Finally, assume that Bon Temps’s earnings and dividends are expected to decline at a constant rate of 6% per year, that is, g = 6%. Why would anyone be willing to buy such a stock, and at what price should it sell? What would be its dividend and capital gains yields in each year?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...