Chapter $7-$ Equity Financing

A broker offers to sell you shares of Bay Area Healthcare, which just paid a dividend of $$2$ per

share. The dividend is expected to grow at a constant rate of $5$ percent per year. The stock's required rate of return is $12$ percent.

a$.$ What is the expected dollar dividend over the next three years?

b$.$ What is the current value of the stock and the expected stock price at the end of each of the next three years?

ANSWER

Given information:

$\backslash$table$[[$Growth rate,$g,5\%$