A company has an odd dividend policy. The company will pay a dividend of $3 per share next year and has announced that it will increase the dividend by $5 per share for each of the subsequent four years and then maintains a constant 2% growth rate. If you require a return of 8 percent on the company’s stock. A. How much will you pay for a share today? B. At the price you are willing to pay for, what is the dividend yield in the first year?

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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A company has an odd dividend policy. The company will pay a dividend of $3 per share next year and has announced that it will increase the dividend by $5 per share for each of the subsequent four years and then maintains a constant 2% growth rate. If you require a return of 8 percent on the company’s stock. A. How much will you pay for a share today? B. At the price you are willing to pay for, what is the dividend yield in the first year?

 

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What is the share price for year 1 to 3

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Can i have the answers for all in formula steps not excel please. Kind of hard to understand. 

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How do we calculate the share price of year 1 to 4. What is the formula ?

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