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Compute how much would be willing to pay

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Problem 1: GCC just paid a dividend today of $0.75 (this is D0). It expects to continue to grow at 6% per year indefinitely. What is the price of the stock if you have a 7% required return?

Problem 2: BBC earned $12 a share last year and paid a dividend of $4 a share. Next year BBC expects to earn $14 and continue with the same dividend payout ratio. Assume that you expect to sell the stock for $140 a year from now. If you require 10% on this stock, how much would you be willing to pay for it?

Reference no: EM132696596

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