Storico Co. just paid a dividend of $3.65 per share. The company will increase its dividend by
Question:
Storico Co. just paid a dividend of $3.65 per share. The company will increase its dividend by 20 percent next year and then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on the company’s stock is 12 percent, what will a share of stock sell for today?
Step by Step Answer:
D0 365 D1 365 1 020 43...View the full answer
Fundamentals Of Corporate Finance
ISBN: 9781265553609
13th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
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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