**Varigrowth Inc. Dividend Growth Analysis**Varigrowth Inc. just paid a dividend of $0.62 (i.e., D₀ = $0.62). Such dividend is expected to grow by 20% per year for the next 3 years, after which it is expected to grow at a long-run rate of 4%. Assuming investors require a 12% return on the stock:a) **What is the price at t=3?** $____ (to the nearest cent)b) **What is its price today?** $____ (to the nearest cent)c) **What is your total rate of return (% to two decimals) if in one year the price is $11.14 and the dividend is $0.75?**- What is your dividend yield? ____%- What is your capital gain (loss) yield? ____%**Instructions:**- **To calculate the price at t=3:** Use the dividend growth model considering the growth rates provided.- **For the price today:** Discount the future cash flows back to the present value.- **Total rate of return:** Consider both the dividend yield and the capital gain (loss) yield in your calculation. Make sure to express the result in percentage form to two decimal places.

The given problem relates to two stage dividend growth model.

Answered: /arigrowth Inc. just paid a dividend of…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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If the last dividend paid by Chemical Brothers Inc. was $1.25 and analysts expect these payments to increase 4% per year, what will the stock price be next year if the required return is 15%? Select one: O a. $12.29 O b. $11.82 O c. $31.25 O d. $12.78 O e. $23.11
A7X Corporation just paid a dividend of $1.40 per share. The dividends are expected to grow at 30 percent for the next 8 years and then level off to a growth rate of 6 percent indefinitely.If the required return is 12 percent, what is the price of the stock today? Choose the correct option A. 106.78 B. 2.30 C. 104.69 D. 81.49 E. 102.59
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