A company yesterday paid its annual dividend of $3.75 and maintained its historic 6.45 per cent annual
Fantastic news! We've Found the answer you've been seeking!
Question:
A company yesterday paid its annual dividend of $3.75 and maintained its historic 6.45 per cent annual rate of growth. You plan to purchase the shares today because you believe that the dividend growth rate will increase to 7.25 per cent for the next three years and the share price will be $63 per share at that point in time:
(a) How much should you be willing to pay for these shares if you require a 13.25 per cent return?
(b) What is the maximum price you should be willing to pay for these shares if you believe that an 8 per cent growth rate can be maintained indefinitely and you require a 13.2 per cent return?
Related Book For
Investment Analysis and Portfolio Management
ISBN: 978-0538482387
10th Edition
Authors: Frank K. Reilly, Keith C. Brown
Posted Date: