Currently, a share of Alpha, Inc pays a dividend of $2 per year, payable at the end
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(2) Currently, a share of Beta, Inc pays a dividend of $3 this year - payable at the end of each year (the year just started, so one year from today). It is expected to that the dividend will grow at 4% per year forever. If the shareholder requires a 9% return on their investment, what price should they pay?
(3) Currently, a share of Gamma, Inc pays a dividend of $1 per year, payable at the end of each year (the year just started, so 1 year from today). It is expected that the dividend will double each of the following three years (so it will pay $2 at the end of year 2, $4 at the end of year 3 and $8 at the end of year 4). After year 4, the dividend will increase as 5% per year forever. If the shareholder requires a 10% return on their investment, what price should they pay?
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-1259024962
6th Canadian edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus, Devashis Mitra, Elizabeth Maynes, William Lim
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