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Stock Value and Dividend per share

1). Stock values: Warren Corporation will pay a $3.60 per share dividend next year. The company pledges to increase its dividend by 4.5 percent per year indefinitely. If you require a 13 percent return on your investment, how much will you pay for the company's stock today?

2). Stock Valuation: suppose you that a company's stock currently sells for $70 per share and the required return on the stock is 12 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?

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Stock Values and Stock Valuation: I need help to solve those problems from book: CORPORATE FINANCE. Eighth edition from: Ross. Westerfield. And Jaffe. ISBN 978-0-07-310590-1 MHID 0-07-310590-2 Part of ISBN 978-0-07-333718-0 MHID 0-07-333718-8

Solution Preview

The attached file has the answers to the two questions:
1). Stock values: Warren Corporation will pay a $3.60 per share dividend next year. The company pledges to increase its dividend by 4.5 percent per year indefinitely. If you require a 13 percent return on your investment, how much will you pay for the company's stock today?

The Dividend Discount (Constant Growth) Model will be used to calculate the fair value of share

Po= Div1/ ...

Solution Summary

Stock Value and Dividend per share have been calculated.

$2.19