The dividend growth model may be used to value a stock V D0 (1 g) k g a What is the value of a stock if D0 $2 k 10 g 6 b What is the value of this stock if the dividend is increased to $3 and the other variables remain constant c What is the value of this stock if the required return declines to 7 ...

This question considers the impact on a stocks valuation while changing one variable a ...

The dividend-growth model may be used to value a stock: V= D0 (1 + g) / k

Question:

The dividend-growth model may be used to value a stock:
V= D0 (1 + g) / k - g
a. What is the value of a stock if:
D0 = $2
k = 10%
g = 6%
b. What is the value of this stock if the is increased to $3 and the other variables remain constant?
c. What is the value of this stock if the required return declines to
7.5 percent and the other variables remain constant?
d. What is the value of this stock if the growth rate declines to 4 percent and the other variables remain constant?
e. What is the value of this stock if the is increased to $2.30, the growth rate declines to 4 percent, and the required return remains 10 percent?
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...