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What is the current share price

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(a) Empire Co pays a constant $11 dividend on its stock. The company will maintain this dividend for the next eight years and will then cease paying dividends forever. If the required return on this stock is 10%, what is the current share price?

(b) Auto Bearings, Inc. is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to growth. The company will pay a $10 per share dividend in 10 years and will increase the dividend by 6% per year thereafter. If the required return on this stock is 13% what is the current share price?

Reference no: EM133015577

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