Gordon Growth Company is expected to pay a dividend of $3.4 next period and dividends are expected
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Question:
- Gordon Growth Company is expected to pay a dividend of $3.4 next period and dividends are expected to grow at 3% per year. The required return is 11%.
- What is the current price?
- What is the value of a stock that is expected to pay a constant dividend of $4.50 per year if the required return is 12%?
- Hint: zero growth like preferred stock.
- What if the company starts increasing dividends by 3% per year, beginning with the next dividend? The required return stays at 12%.
Hint: use DGM
- ABC Inc. will pay a dividend of $2.45 next year. Assume that the company will maintain a constant growth rate of 5% a year forever. If you want a 9% rate of return, how much will you pay for the stock?
Related Book For
Corporate Finance
ISBN: 9781265533199
13th International Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
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