Biarritz Corp. is growing quickly. Dividends are expected to grow at a rate of 32 percent for the next three years, with the growth rate falling off to a constant 6.2 percent thereafter. If the required return is 14 percent and the company just paid a dividend of $2.85, what is the current share price? Antiques 'R' Us is a mature manufacturing firm. The company just paid a dividend of $11.40, but management expects to reduce the payout by 4.75 percent per year, indefinitely. If you require a return of 8 percent return on this stock, what will you pay for a share today?
Biarritz Corp. is growing quickly. Dividends are expected to grow at a rate of 32 percent for the next three years, with the growth rate falling off to a constant 6.2 percent thereafter. If the required return is 14 percent and the company just paid a dividend of $2.85, what is the current share price? Antiques 'R' Us is a mature manufacturing firm. The company just paid a dividend of $11.40, but management expects to reduce the payout by 4.75 percent per year, indefinitely. If you require a return of 8 percent return on this stock, what will you pay for a share today?
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 4P
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Biarritz Corp. is growing quickly. Dividends are expected to grow at a rate of 32 percent for the next three years, with the growth rate falling off to a constant 6.2 percent thereafter.
If the required return is 14 percent and the company just paid a dividend of $2.85, what is the current share price?
Antiques 'R' Us is a mature manufacturing firm. The company just paid a dividend of $11.40, but management expects to reduce the payout by 4.75 percent per year, indefinitely.
If you require a return of 8 percent return on this stock, what will you pay for a share today?
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