Weston Corporation just paid a dividend of $1.00 a share (i.e.,Do = $1.00). Assume Weston has...

   

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Weston Corporation just paid a dividend of $1.00 a share (i.e.,Do = $1.00). Assume Weston has a constant ROE of 10% and it pays out 40% of net income every year. a. What would the growth rate be? c. How much is the current price if the require rate of return is 12%? d. What is the dividend yield for the first year? e. Should you buy the Weston Corporation stock based on your calculations? Weston Corporation just paid a dividend of $1.00 a share (i.e.,Do = $1.00). Assume Weston has a constant ROE of 10% and it pays out 40% of net income every year. a. What would the growth rate be? c. How much is the current price if the require rate of return is 12%? d. What is the dividend yield for the first year? e. Should you buy the Weston Corporation stock based on your calculations?

Answer rating: 100% (QA)

To answer the questions we can use the Gordon Growth Model which relates the dividend growth rate an... View the full answer