What should the market value of the stock be

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Question 1. Constant growth: Reco Corp. is expected to pay a dividend of $2.25 next year. The forecast for the stock price a year from now is $37.50. If the required rate of return is 14 percent, what is the current stock price? Assume constant growth.

Question 2. Preferred stock valuation: The preferred stock of Axim Corp. is currently selling at $47.13. If the required rate of return is 12.2 percent, what is the dividend paid by this stock?

Question 3. Constant growth: Kay Williams is interested in purchasing the common stock of Reckers, Inc., which is currently priced at $37.45. The company is expected to pay a dividend of $2.58 next year and to increase its dividend at a constant rate of 7 percent.

(a) What should the market value of the stock be if the required rate of return is 14 percent?

(b) Is this a good buy? Why or why not?

Reference no: EM132505281

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