Over the past 10 years, the dividends of Party Time, Inc have grown at an annual rate of 15 percent The current (D0) dividend is $3 per share This dividend is expected to grow to $3 40 next year, and then grow at an annual rate of 10 percent for the following two years and 6 percent per year therea...

a P 0 340PVIF 151 374PVIF 152 411PVIF 153 43615 ...

Over the past 10 years, the dividends of Party Time, Inc. have grown at an annual rate

Question:

Over the past 10 years, the dividends of Party Time, Inc. have grown at an annual rate of 15 percent. The current (D0) is $3 per share. This is expected to grow to $3.40 next year, and then grow at an annual rate of 10 percent for the following two years and 6 percent per year thereafter. You require a 15 percent rate of return on this stock.
a. What would you be willing to pay for a share of Party Time stock today?
b. What price would you anticipate the stock selling for at the beginning of year 3?
c. If you anticipated selling the stock at the end of two years, how much would you pay for it today?

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...