Question

Super Carpeting Inc. just paid a dividend ( D0 ) of $1.44, and its dividend is expected to grow at a constant rate (g) of 2.10% per year. If the required return ( rs ) on Super’s stock is 5.25%, then the intrinsic, or theoretical market, value of Super’s shares is per share. Which of the following statements is true about the constant growth model? The constant growth model implies that dividend growth remains constant from now to infinity. The constant growth model implies that dividends remain constant from now to a certain terminal year. Use the constant growth model to calculate the appropriate values to complete the following statements about Super Carpeting Inc.: • If Super’s stock is in equilibrium, the current expected dividend yield on the stock will be per share. • Super’s expected stock price one year from today will be per share. • If Super’s stock is in equilibrium, the current expected capital gains yield on Super’s stock will be per share.

Answer #1

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100.31
104.52
67.59
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