You are analyzing the Victoria Inc. (VI) stock. Assume that VI's required rate of return is 15 percent. Assume that VI is a constant growth company whose last dividend D0, was $3.0, and whose dividend is expected to grow indefinitely at a 6 percent rate forever.
 
A. What is the firm's expected dividend in 3 years?
B. What is the firm's current stock price?
C. What is the stock's expected value 1 year from now?
D. What is the expected dividend yield, the capital gains yield, and the total return during the first year?
E. What would the stock price be if its dividends were expected to have zero growth?
(Zero growth model, K is the same but g=0)

Answer rating: 100% (QA)

A To calculate the expected dividend in 3 years we can use the constant growth formula D3 D0 1 g3 wh... View the full answer