ABC Company announced today that it will begin paying annual dividends next year. The first dividend will be $0.10 a share. The following dividends will be $0.20, $0.40, $0.50, and $0.60 a share annually for the following 4 years, respectively. After that, dividends are projected to increase by 4.0 percent per year. How much are you willing to pay to buy one share of this stock today if your desired rate of return is 10.0 percent?
XYZ Firm recently paid $3.00 as an annual dividend. Future dividends are projected at $3.50, $4.00, $4.50, and $5.00 over the next 4 years, respectively. Beginning 5 years from now, the dividend is expected to increase by 4.0 percent annually. What is one share of this stock worth to you if you require a 10.0 percent rate of return on similar investments?