Determine two distinct estimates of the future dividend growth rate for this company: a high-end growth rate
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Question:
Determine two distinct estimates of the future dividend growth rate for this company: a high-end growth rate and a low-end growth rate. You are to choose these growth rates based on what is reasonable from the data you have on the company's dividend growth in prior years, as presented in your table. The two future dividend growth rates can be any of following:
- The most recent year growth rate;
- The average growth rate over the 8-year period;
- The average growth rate over the most recent 5 years;
- The average growth rate of the most recent 3 years; or
- A growth rate you select that is reasonable, given the 8-year, 5-year, and 3-year averages, as well as the recent year growth rates.
- NOTE: Both dividend growth rates must be lower than the required rate of return used in the constant growth formula. See Part 2 below for the required rate of return to use in the constant growth formula. The required rate of return from BBWI's in 12.0%.
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780135811603
5th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
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