Question

Asked Nov 24, 2019

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A company will pay a dividend of $3.28 per share next year. The dividends are expected to grow at 3.75 percent per year indefinitely. You require a return of 10 percent on your investment.

- How much will you pay for the company’s stock today?
- What is the stock’s dividend yield (Hint: dividend yield is a stock’s dividend divided by its price)?
- What will the price be in a year? What is the implied return given the change in price over the one-year period from today?

Please use a HP 10bii+ Financial Calculator

Step 1

Hi, due to unavailability of HP10bii+ Financial calculator, we will answer this question using excel.

Step 2

Part 1-3:

**Calculation of Current Price, Dividend Yield, Price in 1 Year and Implied Return:**

**Excel Spreadsheet:**

Step 3

**Excel Workings:**

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