contestada

storico company just paid a dividend of $3.65 per share. the company will increase its dividend by 20 percent next year and then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. if the stock price is $67.25, what required return must investors be demanding on the company's stock? (hint: set up the valuation formula with all the relevant cash flows, and use trial and error to find the unknown rate of return.) (do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Respuesta :

The required return must investors be demanding on the company's stock is 71.03

D0 = 3.65

D1 = 3.65( 1+ 0.20) = 4.38

D2 = 4.38( 1+ 0.15) = 5.037

D3 = 5.037( 1+ 0.10) = 5.5407

Value of Stock = D/(1+r) +D2 / (1+r)²+ D3/(1+r)³ D3(1+G)/ r-G + (1+r)3

where r = 0.12

G = 0.05

= 4.38 (1 +0.12) 5.037 + (1 +0.12) 5.5407 + (1 + 0.12) + 5.5407(1+0.05) 0.12-0.05 (1 + 0.12) 3

= 71.03

The shares that make up a corporation or company's ownership are known as stock in the financial world. In proportion to the total number of shares, one share of stock represents fractional ownership in the company.The ownership certificates of any company are referred to as "stocks" in general.

Learn more about stock here:

https://brainly.com/question/14649952

#SPJ4

Otras preguntas