Silicon Wafer company currently pays a dividend `of $1 per share and a share price of $20.

a) If this dividend was expected to grow at 12 percent forever, what is the firm's expected or required rate on equity using a dividend discount model approach?

b) Instead of the situation in part (a), suppose that the dividend was expected to grow at a 20 percent rate for five years and at 10 percent per year thereafter. Now, what is the firm's expected or required return on equity?

Answer rating: 100% (QA)

Part a Calculation of required return on equity ke when dividend growth is 12 ke D1P0 g 111220 12 17... View the full answer