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Stars Ltd is expected to pay a dividend of $0.80 one year from now. Its share price today is $24 and the required rate of return is 12% p.a. Using the constant growth model, calculate the annual growth rate of the dividend. Round your answer to the nearest 0.01%

Stars Ltd is expected to pay a dividend of $0.80 one year from now. Its share price today is $24 and the required rate of return is 12% p.a. Using the constant growth model, calculate the annual growth rate of the dividend. Round your answer to the nearest 0.01%

Essentials Of Investments
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
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c) Stars Ltd is expected to pay a dividend of $0.80 one year from now. Its share price today is $24 and the required rate of return is 12% p.a. Using the constant growth model, calculate the annual growth rate of the dividend. Round your answer to the nearest 0.01% d) An ordinary share is not expected to pay a dividend for the next 3 years. 4 years from now the expected dividend is $2 per share. The dividend is expected to grow at 25% p.a. for the next 2 years, after which it is expected to grow at a constant rate of 2% p.a. indefinitely. If the required rate of return for the share is 10% p.a., calculate the current value of this ordinary share. Round your answer to the nearest cent.
Transcribed Image Text:c) Stars Ltd is expected to pay a dividend of $0.80 one year from now. Its share price today is $24 and the required rate of return is 12% p.a. Using the constant growth model, calculate the annual growth rate of the dividend. Round your answer to the nearest 0.01% d) An ordinary share is not expected to pay a dividend for the next 3 years. 4 years from now the expected dividend is $2 per share. The dividend is expected to grow at 25% p.a. for the next 2 years, after which it is expected to grow at a constant rate of 2% p.a. indefinitely. If the required rate of return for the share is 10% p.a., calculate the current value of this ordinary share. Round your answer to the nearest cent.
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