Assume that Bon Temps is a constant growth company whose last dividend (D, which was paid yesterday) was $2.00 and whose dividend is expected to grow indefinitely at a 4% rate.
What is the firms expected dividend stream over the next 3 years?
What is is current stock price?
What is the stocks expected value 1 year from now?
What are the expected dividend yield, capital gains yield, and total return during the first year?
Now assume that the stock is currently selling at $40.00. What is its expected rate of return?
What would the stock price be if its dividends were expected to have zero growth?