The dividend will continue to grow indefinitely

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1. A company just paid a dividend of $1.50 per share. You expect the dividend to grow 14% over the next year and 9% two years from now. After two years, you have estimated that the dividend will continue to grow indefinitely at the rate of 6% per year. If the required rate of return is 12% per year, what would be a fair price for this stock today? (Answer to the nearest penny.)

2. A company just paid a dividend of $1.30 per share. The consensus forecast of financial analysts is a dividend of $1.80 per share next year and $2.40 per share two years from now. Thereafter, you expect the dividend to grow 6% per year indefinitely into the future. If the required rate of return is 10% per year, what would be a fair price for this stock today? (Answer to the nearest penny.)

Reference no: EM131087786

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