Sia Dance Studios has an annual cash dividend policy that raises the dividend each year by $2\%.$  Last year's dividend, Div $0,$ was $ $3$ per share. The company will be in business for $40$ years with no liquidating dividend. What is the price of this stock if

a$.\hspace{1em}\hspace{1em}$an investor wants a return of $9\%?$

b$.\hspace{1em}\hspace{1em}$an investor wants a return of $11\%?$

c$.\hspace{1em}\hspace{1em}$an investor wants a return of $13\%?$

d$.\hspace{1em}\hspace{1em}$an investor wants a return of $15\%?$

e$.\hspace{1em}\hspace{1em}$an investor wants a return of $17\%?$

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Part $1$

a$.\hspace{1em}\hspace{1em}$What is the price of this stock if an investor wants a return of $9\%?$ 

$

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enter your response here $($Round to the nearest cent.$)$

Part $2$

b$.\hspace{1em}\hspace{1em}$What is the price of this stock if an investor wants a return of $11\%?\hspace{1em}\hspace{1em}$

$

$$

enter your response here$\hspace{1em}\hspace{1em}($Round to the nearest cent.$)$

Part $3$

c$.\hspace{1em}\hspace{1em}$What is the price of this stock if an investor wants a return of $13\%?$ 

$

$$

enter your response here$\hspace{1em}\hspace{1em}($Round to the nearest cent.$)$

Part $4$

d$.\hspace{1em}\hspace{1em}$What is the price of this stock if an investor wants a return of $15\%?$ 

$

$$

enter your response here$\hspace{1em}\hspace{1em}($Round to the nearest cent.$)$

Part $5$

e$.\hspace{1em}\hspace{1em}$What is the price of this stock if an investor wants a return of $17\%?$ 

$

$$

enter your response here$\hspace{1em}\hspace{1em}($Round to the nearest cent.$)$

$$($Round to the nearest cent.$)$$$($Round to the nearest cent.$)$$$($Round to the nearest cent.$)$$$($Round to the nearest cent.$)$$$($Round to the nearest cent.$)$

 

Answer rating: 100% (QA)

To calculate the price of the stock based on different desired returns we can use the dividend discount model DDM formula The DDM formula states that ... View the full answer