Start with the partial model in the file Ch07 P24 Build a Model.xlsx on the textbook's Web
Question:
Start with the partial model in the file Ch07 P24 Build a Model.xlsx on the textbook's Web site. Hamilton Landscaping's dividend growth rate is expected to be 30% in the next year, drop to 15% from Year 1 to Year 2, and drop to a constant 5% for Year 2 and all subsequent years. Hamilton has just paid a dividend of $2.50, and its stock has a required return of 11%.
a. What is Hamilton's estimated stock price today?
b. If you bought the stock at Year 0, what are your expected dividend yield and capital gains for the upcoming year?
c. What are your expected dividend yield and capital gains for the second year (from Year 1 to Year 2)? Why aren't these the same as for the first year?
DividendA 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...
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Corporate Finance A Focused Approach
ISBN: 978-1305637108
6th edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham