Round Barn stock has a required return of 12.20% and is expected to pay a dividend...
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Round Barn stock has a required return of 12.20% and is expected to pay a dividend of $4.30 next year. Investors expect a growth rate of 4.80% on the dividends for the foreseeable future. Required: a. What is the current fair price for the stock? Note: Round your answer to 2 decimal places. Current fair price b. Suppose the stock is selling at this price, but then investors revise their expectations. The new expectation for the growth rate is 4.00%. If investors are rational, what will be the new price for Round Barn stock? Note: Round your answer to 2 decimal places. New price Round Barn stock has a required return of 12.20% and is expected to pay a dividend of $4.30 next year. Investors expect a growth rate of 4.80% on the dividends for the foreseeable future. Required: a. What is the current fair price for the stock? Note: Round your answer to 2 decimal places. Current fair price b. Suppose the stock is selling at this price, but then investors revise their expectations. The new expectation for the growth rate is 4.00%. If investors are rational, what will be the new price for Round Barn stock? Note: Round your answer to 2 decimal places. New price
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