Microsoft Corporation (MSFT) is currently selling for $443 and is paying $3.32 in dividends. The Value Line believes that they will increase their dividends an average of 13.5% per year. Can we use the Gordon Growth Model if we require a 10% rate of return? What if we increase our required rate of return to 14%? What price would we believe MSFT is worth if we require a rate of return of 14%? Is it a potentially good investment for us?

Microsoft Corporation (MSFT) is currently selling for $443 and is paying $3.32 in dividends. The Value Line believes that they will increase their dividends an average of 13.5% per year. Can we use the Gordon Growth Model if we require a 10% rate of return? What if we increase our required rate of return to 14%? What price would we believe MSFT is worth if we require a rate of return of 14%? Is it a potentially good investment for us?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 6P

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