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Calculating Dividends using Dividend Valuation Models

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According to the dividend valuation model, when the required rate of return is 10%, the constant growth rate of dividends is 4%, and the dividends at the end of the first year is $6, then the current price of the stock must be ____?

The price of a stock is $50 today, dividend at the end of the first year is $1, the constant growth rate of the dividends is 7%, the cost of common equity in the form of retained earnings is ____?

By maintaining a record of stable dividends, corporate management hopes to lower the discount rate applied to future dividends of the firm, thus raising the value of the firm.
True or False?

XYZ Company paid a stock dividend of 10%. Before the stock dividend, it had 1 million shares outstanding. If the company had after tax earnings of $5 per share before the stock dividend, then EPS is ___ after the stock dividend?

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Solution Summary

The solution calculates dividends using the valuation models. The current prices of stocks are found.

$2.19