Yesterday, Tobermory plc paid a £2 per share dividend. Its dividends are expected to grow steadily at 3% per year. a) What exactly is a share (stock)? Who exactly are the owners of a company?     b) How much will Tobermory’s dividends be for each of the next three years? c)  If the appropriate discount rate for Tobermory stock is 5%, what should be the current price of Tobermory stock? d) How much should Tobermory stock be selling two years from now? e) If you buy Tobermory stock today, and sell it after exactly two years, what rate of return will you realise?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 17P
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1.Yesterday, Tobermory plc paid a £2 per share dividend. Its dividends are expected to grow steadily at 3% per year. a) What exactly is a share (stock)? Who exactly are the owners of a company?     b) How much will Tobermory’s dividends be for each of the next three years? c)  If the appropriate discount rate for Tobermory stock is 5%, what should be the current price of Tobermory stock? d) How much should Tobermory stock be selling two years from now? e) If you buy Tobermory stock today, and sell it after exactly two years, what rate of return will you realise?
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