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Market expectation of the growth rate of ksi dividends

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KSI, a large energy company, will pay a $2.00 per share dividend at year-end. It is currently trading at $50 per share. Suppose energy stocks have a 16% expected rate of return.

a. What is the market's expectation of the growth rate of KSI's dividends?

b. Suppose dividend growth forecasts for KSI are revised down to 5% per year. What will happen to the price of KSI's stock?

Reference no: EM132853788

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