Talcville Farms just paid a dividend of $3.20 on its stock. The growth rate in dividends is
Question:
Talcville Farms just paid a dividend of $3.20 on its stock. The growth rate in dividends is expected to be a constant 5% per year indefinitely. Investors require a 15% return on the stock for the first three years, a 13% return for the next three years, and an 11% return thereafter. What is the current share price?
Step by Step Answer:
This stock has a constant growth rate of dividends but the required return changes twice To find the ...View the full answer
Fundamentals Of Corporate Finance
ISBN: 9781259654756
10th Canadian Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan, Gordon Roberts, J. Ari Pandes, Thomas Holloway
Related Video
This model assumes that the required rate of return will remain the same for the foreseeable future and also assumes that the growth rate is going to be constant. The same results will be obtained using the sustainable growth rate formula that states g = b x ROI
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