A company that just paid a dividend of $3.25 per share is expected to increase its dividend by 12% the next 8 years and then reduce its dividend growth rate by 2 percentage points per year until it reaches a dividend growth rate of 6%, which is expected to be maintained indefinitely. If dividends are paid annually and investors require a return of 14% on this stock, what is the dividend yield for this stock?

A company that just paid a dividend of $3.25 per share is expected to increase its dividend by 12% the next 8 years and then reduce its dividend growth rate by 2 percentage points per year until it reaches a dividend growth rate of 6%, which is expected to be maintained indefinitely. If dividends are paid annually and investors require a return of 14% on this stock, what is the dividend yield for this stock?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 6P

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