Explain stable corporation has been paying

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Reference no: EM1365073

Stable Corporation has been paying an annual dividend of $3 per share for 10 years and is expected to continue such payment in the future.

(a) If the firm's shares are selling for $20 per share, what is the cost of common stock?

(b) If instead of the no-growth situation, the firm were growing at an annual rate of 5% and increasing its dividends at the same rate, what would be the price of the firm's stock (assume stockholders' desire a 15% rate of return)?

Reference no: EM1365073

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