Question: Investors currently require an expected return of 12 percent on the shares of Dime Corporation, whose dividend payments for this year are expected to be $0.36. The current market price per share is $14.
(a) What is the implied long-term average growth rate of dividends?
(b) If annual growth expectations for Dime increase to 10.5 percent, at what price should the shares trade?
(c) If instead, annual growth expectations fall to only 6 percent, what share price would you anticipate?