Alexander Corp. will pay a dividend of $3.90 next year. The company has stated t

Question

Alexander Corp. will pay a dividend of $3.90 next year. The company has stated that it will maintain a constant growth rate of 4.75 percent a year forever.

If you want a return of 16 percent, how much will you pay for the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

If you want a return of 9 percent, how much will you pay for the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Alexander Corp. will pay a dividend of $3.90 next year. The company has stated that it will maintain a constant growth rate of 4.75 percent a year forever.

Explanation / Answer

Requirement 1 = 3.90/(0.16-0.0475) = 34.67

Requirement 2 = 3.90/(0.09-0.0475) = 91.76

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