What will be the price of the mbi stock

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Reference no: EM132045043

a. Computer stocks currently provide an expected rate of return of 16%. MBI, a large computer company, will pay a year-end dividend of $4 per share. If the stock is selling at $50 per share, what must be the market's expectation of the growth rate of MBI dividends? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Growth rate %

b-1. If dividend growth forecasts for MBI are revised downward to 6% per year, what will be the price of the MBI stock? (Round your answer to 2 decimal places.)

Price $

b-2. What (qualitatively) will happen to the company's price–earnings ratio?

A. The P/E ratio will decrease.

B. The P/E ratio will increase.

Reference no: EM132045043

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