A. A company has just paid dividend of $1.50, and the dividends are expected to grow...

 

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A. A company has just paid dividend of $1.50, and the dividends are expected to grow at 3% forever. If the discount rate is 12%, what is the current value of this promised dividend stream? B. A company announces a new preference share with price $30 per share. The company will not pay any dividend in year 1 but will pay $1.00 at the end of second year, and $2 at the end of 3rd year. From the end of the 4th year, it will pay $4.00 dividend forever. Is it worth to buy this share? Show proper calculations in support of your decision. Assume the discount rate as 10%. A. A company has just paid dividend of $1.50, and the dividends are expected to grow at 3% forever. If the discount rate is 12%, what is the current value of this promised dividend stream? B. A company announces a new preference share with price $30 per share. The company will not pay any dividend in year 1 but will pay $1.00 at the end of second year, and $2 at the end of 3rd year. From the end of the 4th year, it will pay $4.00 dividend forever. Is it worth to buy this share? Show proper calculations in support of your decision. Assume the discount rate as 10%.

Answer rating: 100% (QA)

A To calculate the current value of the promised dividend stream we can use the Gordon Growth Model ... View the full answer