GCB has just paid a dividend of 240 cedis per share. Analysis of the past dividends reveals that GCB’s dividends has been growing at the rate of 10% per annum and this is expected to continue to the foreseeable future. GCB shareholders require a return of 16%.

a) How much will you pay for a share in GCB. 

b) Assume the growth rate was rather 12%, how much will be prepared to pay for a share in GCB? 

c) If you require a return of 12% given the growth rate of 9%, how much will pay for a share in GCB? 

d) At what percentage do you expect the dividends to grow so that you pay 13,560cedis for a share?

e) Assume the share price is pegged at 17,440 cedis but the growth rate remains 9%, what return would you require?

Answer rating: 100% (QA)

a To calculate the price per share we can use the dividend discount model which is Price per share D... View the full answer