4. A company has just paid an annual dividend of $5.00 per share. The company will...

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4. A company has just paid an annual dividend of $5.00 per share. The company will increase its dividend by 30 percent next year. The firm will then reduce its dividend growth rate by 6 percent each year until the dividend reaches the industry average of 6 percent growth. The firm will then maintain that dividend growth rate forever. The annual required rate of return for the company is 14 percent. Find the price of the stock. 4. A company has just paid an annual dividend of $5.00 per share. The company will increase its dividend by 30 percent next year. The firm will then reduce its dividend growth rate by 6 percent each year until the dividend reaches the industry average of 6 percent growth. The firm will then maintain that dividend growth rate forever. The annual required rate of return for the company is 14 percent. Find the price of the stock.

Answer rating: 100% (QA)

To find the price of the stock we can use the Gordon Growth Model also known as the dividend discoun... View the full answer