1.A stock pays no dividends for the first 2 years and then pays a dividend of $2/share for ever. Discount rate is 10%.
2. A stock pays a dividend of $0.60 the first year, $0.80 the second, and $0.90 the third. It then will pay a constant dividend of $2 for ever. Discount rate is 16%.
3. Y corp expects dividends to grow very rapidly for the next 3 years at 30%. The growth rate will then be 8%. The required rate of return is 15%. The current dividend being paid is $1.50. Find the stock price.
4. A stock pays a dividend of $0.60 the first year, $0.80 the second year, and $0.90 the third year. The dividend is then expected to grow at a constant rate of 7% forever. The discount rate is 16%. Currently the stock is selling for $10.00. Should the investors buy this stock?