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Expectation of the growth rate of mbi dividends

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Reference no: EM132000701

Computer stocks currently provide an expected rate of return of 18%. MBI, a large computer company, will pay a year-end dividend of $2.30 per share.

A. If the stock is selling at $53 per share, what must be the market's expectation of the growth rate of MBI dividends?

b-1. If dividend growth forecasts for MBI are revised downward to 7% per year, what will happen to the price of MBI stock?

The price will fall.

The price will rise.

What (qualitatively) will happen to the company's price-earnings ratio?

The price-earnings ratio will fall.

The price-earnings ratio will rise.

Reference no: EM132000701

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