Relationship between the required return and stock price

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Reference no: EM132069379

1. Nofal Corporation will pay a K3.65 per share dividend next year. The company pledges to increase its dividend by 5.1 percent per year, indefinitely. If you require a return of 12 percent on your investment, how much will you pay for the company's stock today?

2. Alexander Corp. will pay a dividend of K2.72 next year. The company has stated that it will maintain a constant growth rate of 4.5 percent a year forever. If you want a return of 12 percent, how much will you pay for the stock? What if you want a return of 8 percent? What does this tell you about the relationship between the required return and the stock price?

3. Anton, Inc., just paid a dividend of K1.95 per share on its stock. The dividends are expected to grow at a constant rate of 4.1 percent per year, indefinitely. If investors require a return of 10.2 percent on this stock, what is the current price? What will the price be in three years? In 15 years?

Reference no: EM132069379

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