1. Company CS paid cash dividends of $1 per share. The management of the company estimates that the growth rate of dividends is 20% per year for the next ten years. After that the growth rate of dividends is expected to be 10% per year to infinity. What should be the price of the stock if the required rate of return of the investment is 15%?
$35.33
$76.89
$46.40
$57.77
2. Martin’s Inc. has paid an annual dividend of $2.50 a share. The dividends are expected to grow at 10% for the next five years. After that, dividends are expected to increase by 3% annually. What is the current value of this stock to you if you require a 9% rate of return on this investment?
$57.77
$46.66
$35.55
$24.44