California Clinics, an investor owned chain of ambulatory care clinics, just paid a dividend of $2 per share The firms dividend is expected to grow at a constant rate of 5 per year, and investors require a 15 rate of return on the stock 1 What is the stocks value 2 Suppose the riskiness of the stoc...

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California Clinics, an investor-owned chain of ambulatory care clinics, just paid a dividend of $2 per share.

Question:

California Clinics, an investor-owned chain of ambulatory care clinics, just paid a of $2 per share. The firm’s is expected to grow at a constant rate of 5% per year, and investors require a 15 % rate of return on the stock.

1. What is the stock’s value?
2. Suppose the riskiness of the stock decreases, which causes the required rate of return to fall to 13%. Under these conditions, what is the stock’s value?
3. Return to the original 15% required rate of return and assume a growth rate estimate increase to 7% per year, what is the stock value?

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...