Share
Explore BrainMass

Assume the stock is selling at $30.29. What would the stock price be if its dividends were expected to have zero growth?

1. Assume the stock is selling at $30.29. What would the stock price be if its dividends were expected to have zero growth?

Now assume the company is expected growth of 30% for the next 3 years, then to return to its long-run constant growth rate of 6%. What is the stock's value under these conditions?

2. Is the stock price based more on long-term or short-term expectations? Answer by finding the % of company A's current stock price based on dividends expected in more than 3 years in the future.

Thanks for your help.

Solution Preview

1.Assume the stock is selling at $30.29. What would the stock price be if its dividends were expected to have zero growth?
If the firm's dividend doesn't grow, and remains $2 every year, the firm's Rr = 13%,
Then Po = D / Rr = $15.38

Now assume the company is expected growth of 30% for the next 3 years, then ...

Solution Summary

You will find the answers to these puzzling questions inside...

$2.19