Explore BrainMass
Share

Stock Price Recommendations based on Dividend Growth

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

As an analyst at Churnem & Burnem Securities, you are responsible for making recommendations to your firm's clients regarding common stocks. After gathering data on Denver Semiconductors, you have found that its dividend has been growing at a rate of 8% per year to the current (Do) $1.25 per share. The stock is now selling for $24 per share, and you believe that an appropriate rate of return for this stock is 15% per year.

a. If you expect that the dividend will grow at a 8% rate into the foreseeable future, what is the highest price at which you would recommend purchasing this stock to your clients?

© BrainMass Inc. brainmass.com March 21, 2019, 5:23 pm ad1c9bdddf
https://brainmass.com/economics/barriers-to-growth/stock-price-recommendations-based-dividend-growth-219255

Solution Preview

As an analyst at Churnem & Burnem Securities, you are responsible for making recommendations to your firm's clients regarding common stocks. After gathering data on Denver Semiconductors, you have found that its dividend has been growing at a rate of 8% per year to the ...

Solution Summary

The expert calculates stock price using the Dividend Discount (Constant Growth) Model.

$2.19