Jameson has just paid a dividend of $8 per share and has announced that it will increase the dividend by $4 per share for each of the next 2 years, and then never pay another dividend. If you require a 6 percent return on the company's stock, you will pay what price for a share today

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microbot949Lv2

16 Feb 2023

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You are looking into a company that has never paid a dividend. They have just announced that they will be paying a one-time dividend of $20 per share in two years. They estimate after that that they will be paying a dividend in year 4 of $2.00 and that they will increase that dividend payout by 15% per year for next 4 years and then increase the dividend by 5% each year for the foreseeable future after that. If the risk free rate is 2.80%, the risk premium on the market is 6.0% and the companyâs beta is 1.1.

1. What is the value of the stock today?

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