** Please Show All Work *** a) What is the value of this stock if the dividend i

Question

** Please Show All Work ***

a)      What is the value of this stock if the dividend is increased to $3 and the other variables remain constant?

b)      What is the value of this stock if the required return declines to 7.5 percent and the other variables remain constant?

c)       What is the value of this stock if the growth rate declines to 4 percent and the other variables remain constant?

d)      What is the value of this stock if the dividend is increased to $2.30, the growth rate declines to 4 percent, and the required return remains 10 percent? 

Explanation / Answer

a) V = 2(1+0.06)/(0.10-0.06) = 53 ($) (ANSWER) (V at D = $3) = (V at D= $2)*3/2 = 53*3/2 = 79.5 ($) (ANSWER) b) V = 2(1+0.06)/(0.075 - 0.06) = 141.33 ($) (ANSWER) c) V = 2(1+0.04)/(0.10 - 0.04) = 34.67 ($) (ANSWER) d) V = 2.3(1+0.04)/(0.10 - 0.04) = 39.87 ($) (ANSWER)

Related Questions

Navigate

• Browse (All)
• Browse #
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.