Suppose that the rate of interest is 10% and a company expects its annual dividend payments to grow at a rate of 6%. The price of the stock is set at $100. Answer the following questions using the fundamentalist approach.
a) What is the company’s expected annual dividend payment?
b) What would be the price of the stock if the rate of interest decreased to 8%?
c) What would be the price of the stock if the expected growth rate of dividends also
decreased to 4%?

Answer rating: 100% (QA)

Applying the Gordon Growth Model GGM We can use the Gordon Growth Model GGM to answer these question... View the full answer