Question

JW Corp has a dividend of $0.50. The dividend is expected to grow at a 6% rate over time. Based on the stock’s risk, investors require an 11-percent rate of return.
a. Using the constant dividend growth model, what should the stock’s price be?
b. Estimate the firm’s dividends for the next 10 years and find their present value. What proportion of the stock’s price is based upon dividends which are expected to occur more than 10 years into the future?
c. What proportion of the firm’s price is based upon dividends which are expected to occur more than five years into the future?


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  • CreatedMarch 27, 2015
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