Last year A1 Bank paid an annual dividend of $7 per share. The bank expects the...
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Last year A1 Bank paid an annual dividend of $7 per share. The bank expects the growth of its dividends to be stable at 2% per year going forward. Students must do their own work, with no help/solutions provided by others. a) If investors require an 8% return, what is the current value of A1 Bank's stock? (round to nearest cent) b) If the stock currently trades at $124.55 per share, what is the dividend growth rate investors expect? (round to nearest percent) Hint: When the constant-growth formula is solved for the growth variable, it becomes: g = -D/P+r Last year A1 Bank paid an annual dividend of $7 per share. The bank expects the growth of its dividends to be stable at 2% per year going forward. Students must do their own work, with no help/solutions provided by others. a) If investors require an 8% return, what is the current value of A1 Bank's stock? (round to nearest cent) b) If the stock currently trades at $124.55 per share, what is the dividend growth rate investors expect? (round to nearest percent) Hint: When the constant-growth formula is solved for the growth variable, it becomes: g = -D/P+r
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