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General Cereal common stock dividends have been growing at an annual rate of 7percentperyearoverthepast10years.Currentdividendsare$1.70pershare. What is the current value of a share of this stock to an investor who requires a 12 percent rate of return if the following conditions exist?

a. Dividends are expected to continue growing at the historic rate for the foresee- able future. b.

The dividend growth rate is expected to increase to 9 percent per year.

c. The dividend growth rate is expected to decrease to 6.5 percent per year.

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Elin Hessel
Elin HesselLv2
30 Sep 2019
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General Cereal common stock dividends have been growing at an annual rate of 7 percent per year over the past 10 years. Current dividends are $1.70 per share. What is the current value of a share of this stock to an investor who requires a 12 percent rate of return if the following conditions exist?

A. Dividends are expected to continue growing at the historic rate for the foreseeable future.

B. The dividend growth rate is expected to increase to 9 percent per year.

C. The dividend growth rate is expected to decrease to 6.5 percent per year.

Simtek currently pays a $2.50 dividend (D0) per share. Next year’s dividend is expected to be $3 per share. After next year, dividends are expected to increase at a 9 percent annual rate for 3 years and a 6 percent annual rate thereafter.

A. What is the current value of a share of Simtek stock to an investor who requires a 15 percent return on his or her investment?

B. If the dividend in year 1 is expected to be $3 and the growth rate over the following 3 years are expected to be only 7 percent and then 6 percent thereafter, what will the new stock price be?

Finance

Simtek currently pays a $2.50 dividend (D 0 ) per share. Next year’s dividend is expected to be $3 per share. After next year, dividends are expected to increase at a9percentannualratefor3yearsanda6percentannualratethereafter. a. What is the current value of a share of Simtek stock to an investor who requires

a.15 percent return on his or her investment?

b. If the dividend in year 1 is expected to be $3 and the growth rate over the fol- lowing 3 years is expected to be only 7 percent and then 6 percent thereafter, what will the new stock price be?

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