Author Question: ABC Company has been growing at a 10% rate, and it just paid a dividend of Do= $3.00. Due to a new ... (Read 41 times)

sam.t96 · **on:** Apr 25, 2021

Question 1

A stock just paid a dividend of $1.15, has a required rate of return of 17%, and a constant dividend growth rate of 3%. What price should this stock be selling for?
◦ $17.08
◦ $8.21
◦ $8.46
◦ $1.22
◦ $6.05

Question 2

ABC Company has been growing at a 10% rate, and it just paid a dividend of Do= $3.00. Due to a new product, ABC expects to achieve a dramatic increase in its short-run growth rate, to 20% annually for the next 2 years. After this time growth is expected to return to the long-run constant rate of 10%. The company's beta is 2.0, the required return on an average stock is 11%, and the risk free rate is 7%. What should the dividend yield (D1/Po) be today? (Round to the nearest whole percent.)
◦ 4%
◦ 5%
◦ 10%
◦ 8%
◦ 2%

pratush dev · **Reply #1 on:** Apr 25, 2021

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