Question: Please show steps and formulas! Thank you! Problem 3. Currently, Xavier Inc. pays a constant dividend ofS4 per share per year. The required rate of

Please show steps and formulas! Thank you!

Problem 3. Currently, Xavier Inc. pays a constant dividend ofS4 per share per year. The required rate of return for this stock is 12 percent. Calculate the current market price for Xavier Inc.'s common stock based on the following information. 3.1. 3.2. 3.3. If Xavier continues to pay an annual dividend of $4 per share forever, how much should you be willing to pay for this stock? [9 points] ANSWER: S per share The company has just publicly announced a new investment. The market expects that with this new investment the dividends should start growing immediately at 3 percent per year forever. Assuming that the discount rate remains the same, what will be the current price of the stock after the announcement? [9 points] ANSWER: S per share You did your own analysis, and you believe that with this new investment the company will still pay an annual dividend of S4 per share in the next three years, and only after that, the dividends will start growing at a constant rate of 3 percent per year forever. Assuming that the discount rate remains the same, how much should you be willing to pay for this stock today? [9 points] ANSWER: S per share

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