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Constant growth Model

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Valuing Stocks 10. Stock Values: Integrated Potato Chips paid $1.00 per share dividend yesterday.You can expect the dividend to grow steadily at a rate of 4 percent per year.

a. What is the expected dividend in each cash of the next 3 years?
b. If the discount rate for the stock is 12 percent at what price will the stock sell?
c. What is the expected stock price 3 years from now?
d. If you buy the stock and plan to hold it for 3 years ,what payments will you receive? What is the percent value of those payments? Compare your answer to (b).

See the attached file.

19. Constant growth Model. Here are data on two stocks ,both of which have discount rates of 15 percent:

Return on equity Stock A 15% Stock B 10%
Earnings per share Stock A $2.00 Stock B $1.50
Dividends per share Stock A $1.00 Stock B $1.00

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The expected dividend and other elements are figured.

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