Martha works for a prominent technology company. Her company just paid a $3 dividend per...
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Martha works for a prominent technology company. Her company just paid a $3 dividend per share. The required return for her companys stock is 15%. A. If the dividend that Marthas company just paid is a perpetual dividend, what is the price of the stock today? (Hint: Zero-growth Dividend Stock) B. Marthas company has decided to increase the companys dividend by 5% forever, on an annual basis starting with the next dividend. If this is the case, what will the value of the dividend be in year 15? (Hint: D0=$3; g=5%) C. Given the growth information from problem B and the required rate of return of 15%, what is the price of the stock today? (Hint: Constant Dividend Growth Stock; D0=$3) D. Given the information from problem B and the required rate of return of 15%, what is the stock price at year 8? (Hint: D0=$3; g=5%) E. Consider the following information. Suppose Marthas company is expected to increase dividends by 15% in one year, and by 10% in two years. After that, her companys dividends will increase at a rate of 5% indefinitely. If the last dividend was $3 and the required rate of return in 15%, what is the current price of the stock.
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