Varigrowth Inc. just paid a dividend of $1.96 (i.e., Do = $1.96). Such dividend is expected to grow by 10% per year for the next 3 years, after which it isexpected to grow at a long-run rate of 4%. Assuming investors require a 14% return on the stock,a) What is the price at t=3? $ 13 (to the nearest cent)b) What is its price today? $(to the nearest cent)c) What is your total rate of return (% to two decimals) if in one year the price is $23.56 and the dividend is $2.12?What is your capital gain (loss) yield?%What is your dividend yield?

D0 = $1.96 Growth rate for 3 years is 10%. D1 = (1.1) * 1.96 = $2.156 D2 = (1.1)^2 * 1.96 = $2.3716…

Answered: Varigrowth Inc. just paid a dividend of…

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

Problem 1PS

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