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Current value of a share of simtek stock

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Simtek currently pays a $4 dividend (D0) per share. Next year's dividend is expected to be $4.75 per share. After next year, dividends are expected to increase at a 9 percent annual rate for 3 years and a 6 percent annual rate thereafter. Use Table II to answer the questions. Do not round intermediate calculations. Round your answers to the nearest cent.

  1. What is the current value of a share of Simtek stock to an investor who requires a 13 percent return on his or her investment?
  2. If the dividend in year 1 is expected to be $4.75 and the growth rate over the following 3 years is expected to be only 8 percent and then 6 percent thereafter, what will the new stock price be?

Reference no: EM133057351

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