Explore BrainMass

Explore BrainMass

    Common stock with ROR

    Not what you're looking for? Search our solutions OR ask your own Custom question.

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

    The Seneca Maintenance Company currently (as of year 0) pays a common stock dividend of $1.50 per share. Dividends are expected to grow at a rate of 11% per year for the next four years and then to continue growing thereafter at a rate of 5% per year. What is the current value of a share of Seneca common stock to an investor who requires a 14% rate of return?
    Should I use PV in Rate of return?

    © BrainMass Inc. brainmass.com December 15, 2022, 5:57 pm ad1c9bdddf

    Solution Preview

    This is to solved using the 2 stage model. The dividends grow at 11% for
    four years and then at 5%.
    The current value of the share is PV of all the ...

    Solution Summary

    The solution explains how to calculate the current price of a stock using the dividend discount model.