If investors in companies of similar risk require a 120


Universal Super Co.(USC) paid a common stock dividend of $4.00 per share this year. USC plans to reduce its common stock dividend by 2.0% next year, then increase increase its dividend by 3.0% per year for each of the next (2) yrs, and finally settle on a dividend growth rate of 4.5% for the rest of the companies life.

If investors in companies of similar risk require a 12.0% rate of return, what is the value of USC common stock today?

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Financial Management: If investors in companies of similar risk require a 120
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