# Perry Motors common stock just paid its annual dividend of $1.80 per share. The required return on the common stock

## Question:

Perry Motors’ common stock just paid its annual dividend of $1.80 per share. The required return on the common stock is 12%. Estimate the value of the common stock under each of the following assumptions about the dividend:

a. Dividends are expected to grow at an annual rate of 0% to infinity.

b. Dividends are expected to grow at a constant annual rate of 5% to infinity.

c. Dividends are expected to grow at an annual rate of 5% for each of the next 3 years, followed by a constant annual growth rate of 4% in years 4 to infinity.

## This problem has been solved!

Do you need an answer to a question different from the above? Ask your question!

## Step by Step Answer:

**Related Book For**

## Principles Of Managerial Finance

**ISBN:** 9781292018201

14th Global Edition

**Authors:** Lawrence J. Gitman, Chad J. Zutter

**Question Details**

Chapter #

**7**- Stock ValuationSection: Self Test Questions

Problem: 1

**View Solution**

Create a free account to access the answer

**Cannot find your solution?**

Post a FREE question now and get an answer within minutes.
* Average response time.