ABC Corp. has just paid a dividend of $0.45. ABC has an annual required return of 11.68%.
Attempt 1/5 for 10 pts.
Part 1
If dividends are annual and expected to be constant, what is the value of the stock?
3.85
Correct ✓
Attempt 1/5 for 10 pts.
Part 2
What is ABC's dividend yield?
11.88%
Correct ✓
Attempt 1/5 for 10 pts.
Part 3
From now on, assume that the dividend of $0.45 was a quarterly dividend. What is the quarterly discount rate?
2.7732%
Correct ✓
Attempt 2/5 for 9 pts.
Part 4
What is the value if dividends are constant and quarterly?
16.2
Correct ✓
Attempt 1/5 for 10 pts.
Part 5
We now think that dividends will grow by 0.5% from quarter to quarter. The firm just paid the quarterly dividend of $0.45. What is the value of the stock?
19.88
Correct ✓
Attempt 2/5 for 9 pts.
Part 6
A different analyst thinks that ABC's dividends will grow by 5% for the next 4 quarters, and then grow by 0.5% thereafter. What is the value of the stock?