You own a share of stock in Macho Man Incorporated. The company is expected to pay a dividend of $1.47 per share next year. As an investor, you want a 11.00% annual return on Macho stock. (you can assume that the price of a share is the PV of its dividends.)
What is the value of a share of Macho Man stock today if the company pays the same dividend forever?
Shack Diesel Company has stock trading today at $40.88 per share. The company just paid a $2.39 per share dividend. Kenny Smith, an analyst, believes investors should seek a 12.00% return to hold the stock. If we value Shack Diesel using the constant growth model, what dividend growth rate would justify these assumptions?