If a certain corporation just recently paid a dividend of $3.70, and the dividend is expected...

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If a certain corporation just recently paid a dividend of $3.70,and the dividend is expected to grow at 4% for a long time into thefuture, calculate the price of this company’s stock at requiredreturns of 8%, 10% and 12%. Then using a 10% required return,calculate the price at growth rates of 2%, 5% and 8%. Discuss whatyou see in the behavior of the prices in response to changes in thegrowth rate and changes in the required return. Using the price youcalculated with a 4% growth rate and a 10% required return, whatwould be the expected dividend and price five years from today

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a Computation of Share Price if Required Return Re 8 10 12 Key Data Expected Dividend D1 370 4 3848 Required Return Re 8 10 12 Growth Rate g 4 Solution As per dividend discount model Price of the Share P0 D1Reg i If Re 8 Price of the Share P0 3848 84 962 ii If Re 10 Price of the Share P0 3848 104 6413 iii If Re 12 Price of the Share See Answer

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If a certain corporation just recently paid a dividend of $3.70,and the dividend is expected to grow at 4% for a long time into thefuture, calculate the price of this company’s stock at requiredreturns of 8%, 10% and 12%. Then using a 10% required return,calculate the price at growth rates of 2%, 5% and 8%. Discuss whatyou see in the behavior of the prices in response to changes in thegrowth rate and changes in the required return. Using the price youcalculated with a 4% growth rate and a 10% required return, whatwould be the expected dividend and price five years from today