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    Growth Rate of Stocks and Dividend

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    1. a. Computer stocks currently provide an expected rate of return of 16%. Dell, a large computer company, will pay a year-end dividend of $2 per share. If the stock is selling at $50 per share, what must be the market's expectation of the growth rate of Dell dividends?

    1. b. If dividend growth forecasts for Dell are revised downward to 5% per year, what will happen to the price of Dell stock? What (qualitatively) will happen to the company's price-earnings ratio?

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    Solution Preview

    Growth Rate
    1. a. Computer stocks currently provide an expected rate of return of 16%. Dell, a large computer company, will pay a year-end dividend of $2 per share. If the stock is selling at $50 per share, what must be the market's expectation of the growth rate of Dell ...

    Solution Summary

    The solution examines growth rate for computer stocks. The market expectations of the growth rate for Dell dividends is examined.

    $2.19

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