According to the 2012 Value Line Investment Survey, the growth rate in dividends for IBM for the

Question:

According to the 2012 Value Line Investment Survey, the growth rate in dividends for IBM for the next five years is expected to be 12.5 percent. Suppose IBM meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5 percent indefinitely. Assume investors require a return of 11 percent on IBM stock. Is the stock priced correctly? What factors could affect your answer?

(The 52-week Hi and Lo are the highest and lowest stock prices over the previous 52 weeks).

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...