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    Value of common shares

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    A common share paid a dividend of $1.00 per share five years ago. The dividend paid yesterday was $1.22. If dividend growth continues at its historical rate, what will be the value of the common shares six years from today? Investors require a return of 10% on investments of this level of risk.

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    Solution Preview

    The growth Rate for dividend (g) = (1.22/1.00)^(1/5) - 1
    =0.04057 or ...

    Solution Summary

    This solution helps entails formulas and computations to value common shares.