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How much should you be willing to pay for the stock

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Question - The Fijian Holding Limited's last dividend was $1.25 and the directors expect to maintain the historic 4 percent annual rate of growth. You plan to purchase the stock today because you feel that the growth rate will increase to 7 percent for the next three years and the stock will then reach $25.00 per share.

i. How much should you be willing to pay for the stock if you require a 16 percent return?

ii. How much should you be willing to pay for the stock if you feel that the 7 percent growth rate can be maintained indefinitely and you require a 16 percent return?

Reference no: EM132558732

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