Stock AAA pays semiannual dividends. The stock has just paid a dividend, thus the next dividend...

 

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Stock AAA pays semiannual dividends. The stock has just paid a dividend, thus the next dividend is expected to be paid in exactly 6 months and each subsequent dividend is expected to be paid 6 months after the previous dividend. It is expected that the amount of the dividend paid 6 months from today will be $3.50 and that each subsequent dividend after the dividend coming 6 months from today will be 1.7% greater than the previous dividend. The price of the stock is $140 What is the semiannually compounded annual discount rate being used to value the stock? Stock AAA pays semiannual dividends. The stock has just paid a dividend, thus the next dividend is expected to be paid in exactly 6 months and each subsequent dividend is expected to be paid 6 months after the previous dividend. It is expected that the amount of the dividend paid 6 months from today will be $3.50 and that each subsequent dividend after the dividend coming 6 months from today will be 1.7% greater than the previous dividend. The price of the stock is $140 What is the semiannually compounded annual discount rate being used to value the stock?

Answer rating: 100% (QA)

We can use the Dividend Discount Model DDM with constant growth to solve for the discount rate Heres ... View the full answer