Explore BrainMass
Share

Explore BrainMass

    A share of stock has a dividend of Do = $5. The dividend is expected to grow at a 20% annual rate for the next 10 years, then at a 15% rate for 10 more years, and then at a long-run normal growth rate of 10% forever...

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    45. A share of stock has a dividend of Do = $5. The dividend is expected to grow at a 20% annual rate for the next 10 years, then at a 15% rate for 10 more years, and then at a long-run normal growth rate of 10% forever.

    If investors require a 10% percent return on this stock, what is its current price?

    100.00
    82.35
    195.50
    212.62

    The data given in the problem are internally inconsisten, ie the situation described is impossible in that no equilibrium price can be produced.

    © BrainMass Inc. brainmass.com October 9, 2019, 5:21 pm ad1c9bdddf
    https://brainmass.com/business/accounting-for-corporations/55300

    Solution Summary

    You will find the answer to this puzzling question inside...

    $2.19