Bradley Broadcasting expects to pay dividends of $1.12, $1.25, and $1.40 in one, two, and three years, respectively. After that, dividends are expected to grow at a constant rate of 5% forever (so, t4 to ?). Stocks of similar risk yield 12%.
a. What should the price of Bradley Broadcasting stock be today?
b. What is growth rate of the Bradley Broadcasting dividend during year 2?
c. How much is Bradley's stock price expected to increase during the first year?
d. What is the expected capital gains yield on Bradley Broadcasting stock during year 8?