Bronze Company Ltd last paid a dividend of $0.20 per share. This dividend is expected to grow at 15% per annum for three years, then at 10% per annum for the next three years, after which it is expected to grow at a 5% rate forever. REQUIRED: (i) Calculate the price you would pay for the share if your required rate of return is 10%? (ii) Calculate the price you would pay for the share if you expected to hold the share for only three years

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
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Bronze Company Ltd last paid a dividend of $0.20 per share. This dividend is expected to grow at 15% per annum for three years, then at 10% per
annum for the next three years, after which it is expected to grow at a 5% rate forever.
REQUIRED:
(i) Calculate the price you would pay for the share if your required rate of return is 10%?
(ii) Calculate the price you would pay for the share if you expected to hold the share for only three years
Transcribed Image Text:Bronze Company Ltd last paid a dividend of $0.20 per share. This dividend is expected to grow at 15% per annum for three years, then at 10% per annum for the next three years, after which it is expected to grow at a 5% rate forever. REQUIRED: (i) Calculate the price you would pay for the share if your required rate of return is 10%? (ii) Calculate the price you would pay for the share if you expected to hold the share for only three years
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