Morocco Manufacturing does not currently pay a cash dividend, but it does pay a stock...
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Morocco Manufacturing does not currently pay a cash dividend, but it does pay a stock dividend of 3% per year. A stock dividend does not directly pay cash to the shareholders. Instead it is a paymentin the form of additional shares of stock. For example, if you own 100 shares, a 3% stock dividend will mean that you will receive 3 new shares, giving you a total of 103 shares.Morocco will not pay a cash dividend, and will maintain the 3% per year stock dividend for 10 years. Morocco will then discontinue thestock dividend and institute a cash dividend of $5 per share, starting in year 11. In subsequent years the cash dividend will increase at a constant growth rate of 6% per year.The appropriate interest rate is 14% per year. Calculate the current intrinsic or fundamental value of a share of Morocco Manufacturing stock.
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