Gillette's most recent annual dividend was $8 per share. The company expects the growth of its dividends to be stable at 3% per year going forward. a) If investors require a 9% return, what is the current value of Gillette's stock? (round to nearest cent) b) If the stock currently trades at $116.57 per share, what is the dividend growth rate investors expect? (round to nearest percent) Hint: When the constant-growth formula is solved for the growth variable, it is g = -D/P +r

Essentials Of Investments
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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**Gillette's Stock Valuation Problem**

Gillette's most recent annual dividend was $8 per share. The company expects the growth of its dividends to be stable at 3% per year going forward. 

**Questions:**

a) If investors require a 9% return, what is the current value of Gillette's stock? (Round to the nearest cent)

b) If the stock currently trades at $116.57 per share, what is the dividend growth rate investors expect? (Round to the nearest percent)

**Hint:** When the constant-growth formula is solved for the growth variable, it is \( g = \frac{D}{P} + r \)
Transcribed Image Text:**Gillette's Stock Valuation Problem** Gillette's most recent annual dividend was $8 per share. The company expects the growth of its dividends to be stable at 3% per year going forward. **Questions:** a) If investors require a 9% return, what is the current value of Gillette's stock? (Round to the nearest cent) b) If the stock currently trades at $116.57 per share, what is the dividend growth rate investors expect? (Round to the nearest percent) **Hint:** When the constant-growth formula is solved for the growth variable, it is \( g = \frac{D}{P} + r \)
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