Question

- A company just paid a dividend of $3.50 per share on its stock. The dividends are expected to grow at a constant rate of 3.6% per year. (i) If the required rate of return is 11.6%, what is current price? (ii) What will be the price of this stock in five years? (iii) You own 10 stocks of the company., and were planning to hold these stocks for 5 years before you sell. Suppose your friend is willing to buy all the 10 shares for $54 per share. Would you sell these shares to your friend, or would you hold these shares for 5 years?

Answer #1

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