A company just paid a dividend of $1.50 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. a. If investors require a return of 8 percent on the company’s stock, what is the current price? What will the price be in three years? b. If investors require a return of 10 percent on the company’s stock, what is the current price? c. In light of your answers to part a and part b, what is the relationship between a stock’s price and the required rate of return? Please use a HP10bii+ Financial Calculator

Question

A company just paid a dividend of $1.50 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely.

a. If investors require a return of 8 percent on the company’s stock, what is the current price? What will the price be in three years?

b. If investors require a return of 10 percent on the company’s stock, what is the current price?

c. In light of your answers to part a and part b, what is the relationship between a stock’s price and the required rate of return?

Please use a HP10bii+ Financial Calculator 

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