Trusty gets’ Lucky Ltd., just paid a dividend of $2.00 per share. The managing director just announced that it is planned to increase dividends at a rate of 6% indefinitely. An appropriate discount rate for this company is 16% per annum. i. What is the firm’s expected dividend stream over the next 3 years? ii. What is the firm’s current stock price? iii. What is the firm’s expected value in one year? iv. What are the expected dividend yield, capital gains yield and total return during the first year?

Answer rating: 100% (QA)

Solution D 0dividend at time 0 2 D1dividend at Time1 26212 ggrowth rate6 Ke16 P0 D1K e g2 106166 212 ... View the full answer