a. What is the current price of the stock for a company that will pay a $2.50 dividend in one year and has a 12% rate of return? The growth rate of the dividends is 5%.
b. The required return on Meadowland’s stock is 11% and the dividend growth rate is 2.5%. The stock is currently selling for $23.50 a share. What is the dividend yield?
c. A company has offered stock that won’t pay annual dividends at first, but will start paying an annual dividend of $4 starting 6 years from now. If the required return is 5%, what should you pay for the stock today?