2). a). The dividend paid this year (D0) on a share of common stock is...
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2). a). The dividend paid this year (D0) on a share of common stock is $10. If dividends grow at a 5% rate for the foreseeable future, and the required return is 10%, what is the value of the stock today? Last year (date t = -1)? Next year (date t = 1)?
b). The current price of a stock (P0) is $20 and last years price (P-1) was $18.87. The last dividend (D0) is $2. Assume a constant growth rate (g) in dividends and stock price. What is the stocks return for the coming year?
c). A company pays a current dividend (D0) of $1.20 per share on its common stock. The annual dividend will increase by 3% and 4%, respectively, over the next two years (D1, D2), and by 6% per year thereafter. The appropriate discount rate is 12%. What is P0?
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