Consider a stock that most recently paid a dividend of $0.75. The company plans toincrease dividends by 50% each year for the next 3 years, then by 20% each year for 4years, and then level off to a permanent growth rate in dividends of 6%.
a. If the required return for this stock is 11%, what is the value of the stock today?
b. What are dividend yield and capital gains yield this year?
c. What will be the value of the stock in 7 years?
d. What will be the dividend yield and capital gains yield in 7 years?