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Author Question: The variable-growth dividend valuation model (Read 57 times)

tyratatyanna

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on: Mar 29, 2022

Question 1

The Hopkinton Company just paid $2.25 as its annual dividend. The dividends have been increasing at a rate of 5% annually and this trend is expected to continue. The stock is currently selling for $63.60 a share. What is the rate of return on this stock?
◦ 3.60%
◦ 3.70%
◦ 8.7%
◦ 11.8%

Question 2

The variable-growth dividend valuation model
◦ develops the value of a stock using the future value of dividends minus a rate of capital gain growth.
◦ is valuable because it accounts for the general growth patterns of most companies.
◦ is invalid if at any point in time the growth rate exceeds the required rate of return.
◦ assumes the rate of dividend growth will vary indefinitely.
Fundamentals of Investing ¦ Zutter, Smart ¦ 14th Edition
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Marked as best answer by tyratatyanna on Mar 29, 2022

DevinBrifm

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Reply #1 on: Mar 29, 2022
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tyratatyanna

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Reply 2 on: Mar 29, 2022
Wow, this really help

Dnite

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Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

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