What is the required rate of return on your company stock

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Reference no: EM131333558

Assume that the average firm in your company's industry is expected to grow at a constant rate of 4% and that its dividend yield is 8%. Your company is about as risky as the average firm in the industry and just paid a dividend (D0) of $1. You expect that the growth rate of dividends will be 50% during the first year(g0,1 = 50%) and 20% during the second year (g1,2 = 20%). After Year 2, dividend growth will be constant at 4%.

1) What is the required rate of return on your company's stock? 12.32 %

2) What is the estimated value per share of your firm's stock? Round your answer to the nearest cent. Do not round your intermediate computations. _______

Reference no: EM131333558

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