Dividend (Div) Required return (r) Growth rate (g) Now we can try this by introducing constant growth in dividends. A. Dividend is $1.00 per year. Investors require a 10% return. Initially, it is thought there will be 0% dividend growth. Div r-g B. Dividend is $1.00. Required return is still 10% but investors now expect the dividend will grow 2% per annum. C. Dividend is $1.00 per year. Market optimism drives the required return down to 8% while at the same time a new growth strategy boosts the expected dividend growth rate to 696
Dividend (Div) Required return (r) Growth rate (g) Now we can try this by introducing constant growth in dividends. A. Dividend is $1.00 per year. Investors require a 10% return. Initially, it is thought there will be 0% dividend growth. Div r-g B. Dividend is $1.00. Required return is still 10% but investors now expect the dividend will grow 2% per annum. C. Dividend is $1.00 per year. Market optimism drives the required return down to 8% while at the same time a new growth strategy boosts the expected dividend growth rate to 696
Chapter7: Valuation Of Stocks And Corporations
Section: Chapter Questions
Problem 21P
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