Question

The Lo Company earned $2.60 per share and paid a dividend of $1.30 per share in the year just ended. Earnings and dividends per share are expected to grow at a rate of 5 percent per year in the future. Determine the value of the stock:
a. if the required rate of return is 12 percent.
b. if the required rate of return is 15 percent.
c. given your answers to Parts a and b, how are stock prices affected by changes in investor’s required rates of return?


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  • CreatedMarch 27, 2015
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