A company will pay a dividend of $3.28 per share next year. The dividends are expected to grow at 3.75 percent per year indefinitely. You require a return of 10 percent on your investment. How much...

A company will pay a dividend of $3.28 per share next year. The dividends are expected to grow at 3.75 percent per year indefinitely. You require a return of 10 percent on your investment.

1. How much will you pay for the company’s stock today?


2. What is the stock’s dividend yield (Hint: dividend yield is a stock’s dividend divided by its price)?


3. What will the price be in a year? What is the implied return given the change in price over the one-year period from today?

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