Reference no: EM132613776

(a) A Corporation is expected to pay the following dividends over the next four years: $2.25, $4.00, $3.00, $1.00. Afterwards, the company pledges to maintain a constant 8 percent growth rate in dividends forever. If the required return on the stock is 16 percent, what is the current share price?

(b) B Corporation just paid a dividend of $2.50 per share on its stock. The growth rate in dividends is expected to be a constant 6.5 percent per year indefinitely. Investors require a 20 percent return on the stock for the first three years, then a 15 percent return for the next three years, and then a 10 percent return thereafter. What is the current share price?

(c) C Corporation increases its dividend 5 percent per year every year. The company uses a discount rate of 8 percent, and the stock currently sells for $85 per share. If you buy a share of the stock today and hold on to it for at least three years, what do you expect the value of your dividend to be three years from today?

(d) D Corporation stock currently sells for $70 per share. The company is expected to pay a dividend of $4 per share next year, and analysts project that dividends should increase at 4 percent per year for the indefinite future. What must the relevant discount rate be for the stock?