Beatle Inc just paid a $5.00 dividend. Beatle’s dividends are expected to grow at 4% in perpetuity. The stock required discount rate is 14%.
a. Calculate the company stock prices today.
b. Calculate the stock price one year from today and calculate the rate of return to an investor buying the stock today and holding it for just one year (he sells immediately after receiving next year's dividend). Show the return components, dividend yield, and capital gains rate.
c. What will happen to the stock price if Beatle Inc. realizes the company is instead in perpetual 1.0% growth only, calculate the new stock price and the loss to the investor who bought the stock in section ‘a’ price.

Answer rating: 100% (QA)

a The price of the stock today is 3571 Price Dividend Discount Rate ... View the full answer