What will the effect be on the stock price

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If a stock is expected to pay an annual dividend of $3.50 this year, what is the approximate present value of the stock, given that the discount rate is 12.5% and dividends are expected to grow at a rate of 10% per year? If, due to an economic downturn, the Board of Directors decides to cut the dividend in half, what will the stock price be? If, after a couple of years, the CEO starts a new policy where all profits centers must increase annual growth from 10% to 12%, what will the effect be on the stock price? (Assume dividend remains at the reduced level.)

Reference no: EM132166770

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