1. Patience, Inc., just paid a dividend of $2.90 per share on its stock. The dividends...

 

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1. Patience, Inc., just paid a dividend of $2.90 per share on its stock. The dividends are expected to grow at a constant rate of 4.75 percent per year, indefinitely. Assume investors require an 11.50 percent return on this stock. What is the current price? SHOW ALL WORK: Formula: Po = Do (1+g)/(R-g) 2. Michael's, Inc. just paid $2.25 to its shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 4.90 percent. If you require a rate of return of 9.1 percent, how much are you willing to pay today to purchase one share of Michael's stock? SHOW ALL WORK: Formula: Po = Do (1 + g) / (R-g) 1. Patience, Inc., just paid a dividend of $2.90 per share on its stock. The dividends are expected to grow at a constant rate of 4.75 percent per year, indefinitely. Assume investors require an 11.50 percent return on this stock. What is the current price? SHOW ALL WORK: Formula: Po = Do (1+g)/(R-g) 2. Michael's, Inc. just paid $2.25 to its shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 4.90 percent. If you require a rate of return of 9.1 percent, how much are you willing to pay today to purchase one share of Michael's stock? SHOW ALL WORK: Formula: Po = Do (1 + g) / (R-g)