Explain stock valuation with constant growth rates

Reference no: EM1317004

Explain Stock Valuation with constant growth rates in the dividends

DPS calculation-

1. Warr Corporation just paid a dividend of $1.25 a share (i.e., D0 = 1.25. The dividend is expected to grow 12% a year for the next 3 years and then at 5% a year thereafter. What is the expected dividend per share for each of the next 5 years? Round the answers to the nearest hundredth.

a. D1 =

b. D2 =

c. D3 =

d. D4 =

e. D5 =

Constant growth valuation-

2. Constant growth valuation Thomas Brothers is expected to pay a $3 per share dividend at the end of the year (i.e., D1 = $3). The dividend is expected to grow at a constant rate of 6% a year. The required rate of return on the stock, rs, is 19%. What is the stock's value per share?

Round the answer to the nearest hundredth.

Reference no: EM1317004

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