eBook Problem WalkThrough
Investors require a 7% rate of return on Mather Company's stock (i.e., r_{s} = 7%).

1.
=2.75*(1+(6%))/(7%(6%))=19.8846153846154
2.
=2.75*(1+(0%))/(7%(0%))=39.2857142857143
3.
=2.75*(1+(2%))/(7%(2%))=56.10
4.
=2.75*(1+(6%))/(7%(6%))=291.50
5.
=2.75*(1+(8%))/(7%(8%))=297.00
6.
=2.75*(1+(12%))/(7%(12%))=61.60
7.
These results show that the formula does not make sense if the
required rate of return is equal to or less than the expected
growth rate.
8.
It is not reasonable for a firm to grow indefinitely at a rate
higher than its required return.
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