You are contemplating investing in ordinary shares that distributed a $5.00 dividend yesterday. You anticipate a 5% growth rate for the next 3 years, followed by a stable long-term growth rate of 4% beyond year 3. 

With a 12 percent required rate of return, calculate the projected dividend in year 4 and the share price in year 3. 

Is the share worth buying if the current share price is trading at $70.50?

Answer rating: 100% (QA)

To calculate the projected dividend in year 4 apply the growth rate of 5 for the next 3 years and th... View the full answer