Question
Seitz Glassware is trying to determine its growth rate for an annual cash dividend. The most...
Seitz Glassware is trying to determine its growth rate for an annual cash dividend. The most recent? dividend, Div 0?, was $ 0.60 per share. The? stock's target return rate is 11?%. What is the? stock's price if
a. the annual growth rate is 2?%?
b. the annual growth rate is 4?%?
c. the annual growth rate is 7?%?
d. the annual growth rate is 8?%?
e. the annual growth rate is 10?%?
Homework Answers
Answer #1
This question requires an application of constant growth dividend discount model, according to which value of shares today, V0 is mathematically represented as:
r = 11%
a. the annual growth rate is 2?%
D1 = D0 * (1 + g) = 0.60 * (1 + 2%) = 0.612
V0 = $6.8
b. the annual growth rate is 4?%
D1 = D0 * (1 + g) = 0.60 * (1 + 4%) = 0.624
V0 = $8.91
c. the annual growth rate is 7?%
D1 = D0 * (1 + g) = 0.60 * (1 + 7%) = 0.642
V0 = $16.05
d. the annual growth rate is 8?%
D1 = D0 * (1 + g) = 0.60 * (1 + 8%) = 0.648
V0 = $21.6
e. the annual growth rate is 10?%
D1 = D0 * (1 + g) = 0.60 * (1 + 10%) = 0.66
V0 = $66
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