Alexander Corp. will pay a dividend of $3.60 next year. The company has stated t
ID: 2661158 • Letter: A
Question
Alexander Corp. will pay a dividend of $3.60 next year. The company has stated that it will maintain a constant growth rate of 5 percent a year forever.
If you want a return of 17 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 10 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).)
Requirement 1:If you want a return of 17 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).)
Explanation / Answer
lexander Corp. will pay a dividend of $3.60 next year. The company has stated that it will maintain a constant growth rate of 5 percent a year forever.
If you want a return of 17 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).)
Current stock price = Expected Dividend/(Required Rate-growth rate)
Current stock price = 3.60/(0.17-0.05)
Current stock price = $ 30
If you want a return of 10 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).)
Current stock price = Expected Dividend/(Required Rate-growth rate)
Current stock price = 3.60/(0.10-0.05)
Current stock price = $ 72
Requirement 1:
If you want a return of 17 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).)
Current stock price = Expected Dividend/(Required Rate-growth rate)
Current stock price = 3.60/(0.17-0.05)
Current stock price = $ 30
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