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The french thaler and companys stock has paid dividends of

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The French Thaler and Company"s stock has paid dividends of $1.60 over the past 12 months. Its historical growth rate of dividends has been 8 percent, but analysts expect the growth to slow to 5 percent annually for the foreseeable future.

  1. Determine the value of the stock if the required rate of return on stocks of similar risk is 15 percent.
  2. If analysts believe the risk premium on the stock should be reduced by 2 percentage points, what is the new required rate of return on French Thaler and Company stock? How much should its price change from the answer you computed in part (a)?

Reference no: EM13569229

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