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Maintain a constant growth rate

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Cape Corp. will pay a dividend of $3.50 next year. The company has stated that it will maintain a constant growth rate of 4.75 percent a year forever.

a.If you want a return of 16 percent, how much will you pay for the stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

b.If you want a return of 9 percent, how much will you pay for the stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Reference no: EM132528918

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