At what price should the shares trade

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Question: Investors currently require a market capitalization rate of 14 percent on the shares of Dime Corporation, whose dividend payments for this year are expected to be 36¢. The current market price per share is $8.50.

(a) What is the implied long-term average growth rate of dividends?

(b) If annual growth expectations for Dime increase to 12 percent, at what price should the shares trade?

(c) If instead, annual growth expectations fall to only 5 percent, what share price would you anticipate?

Reference no: EM131750204

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