Peak's Organic Foods' current dividend is $5.00. You expect the growth rate to be 8 percent for

Question:

Peak's Organic Foods' current dividend is $5.00. You expect the growth rate to be 8 percent for years 1 to 5, and 2 percent from years 6 to infinity. The required rate of return on this firm’s equity is 10 percent. Determine the following:

a. The expected dividend at the end of year 5

b. The expected dividend at the end of year 6

c. The expected price of the stock at the end of year 5 (immediately after the year 5 dividend)
d. The price of the stock 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...