Relationship between required return and stock price

Assignment Help Financial Management

Reference no: EM131995935

1. Red, Inc., Yellow Corp., and Blue Company each will pay a dividend of $3.25 next year. The growth rate in dividends for all three companies is 4 percent. The required return for each company’s stock is 8 percent, 11 percent, and 14 percent, respectively. What is the stock price for each company? What do you conclude about the relationship between the required return and the stock price?

2. Tell Me Why Co. is expected to maintain a constant 3.9 percent growth rate in its dividends indefinitely. If the company has a dividend yield of 5.9 percent, what is the required return on the company’s stock?

Reference no: EM131995935

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