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  3. presently, stock a pays a dividend of $1.00 a shar

Presently, Stock A pays a dividend of $1.00 a share, and you expect the dividend...

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Finance

Presently, Stock A pays a dividend of $1.00 a share, and you expect the dividend to grow rapidly for the next four years at 20 percent. Thus, the dividend payments will be

Year Dividend

1 $1.20

2 1.44

3 1.73

4 2.07

After this initial period of super growth, the rate of increase in the dividend should decline to 2 percent. If you want to earn 6 percent on investments in common stock, what is the maximum you should pay for this stock?

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