The Lo Company earned $2.60 per share and paid a dividend of $1.30 per share in the

Question:

The Lo Company earned $2.60 per share and paid a 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?
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...