1. Suppose Best Buy company is forecasting a constant annual decline in its dividends of 4% (i.e. the constant growth rate is -4%). What price would you expect to pay for the stock with a 9.5% required rate of return and an annual dividend of $3 which will be paid next year?
2. Best Buy has just paid a dividend of $4 per share (this dividend is already paid therefore it is not included in the current price).The companys dividend is estimated togrow at a rate of 35% in year 1 and 20% in year 2. The dividend is then expected to grow at a constant rate of 6.5% thereafter. The companys opportunity cost of capital is 12% what is the current value of Best Buystock?

Answer rating: 100% (QA)

The two scenarios you described have different dividend growth rates Heres how to find the current v... View the full answer