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How important are investors expectations on future dividend

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Reference no: EM132684036

Mercier Corporation's stock is selling for $95. It has just paid a dividend of $5 per share. The expected growth rate in dividends is 6%.

Question 1: What is the required rate of return on this stock?

Question 2: If the growth rate is 8% annually (instead of 6%), what will the stock price be?

Question 3: Given your answers to parts (i) and (ii) above, how important are investors' expectations on future dividend growth to the current stock price and why?

Reference no: EM132684036

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