# If you require a 13 percent return on your investment, how much will you pay for the company's stock today? If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?

1). Stock values: Warren Corporation will pay a $3.60 per share dividend next year. The company pledges to increase its dividend by 4.5 percent per year indefinitely. If you require a 13 percent return on your investment, how much will you pay for the company's stock today?

2). Stock Valuation: suppose you that a company's stock currently sells for $70 per share and the required return on the stock is 12 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?

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Stock Values and Stock Valuation: I need help to solve those problems from book: CORPORATE FINANCE. Eighth edition from: Ross. Westerfield. And Jaffe. ISBN 978-0-07-310590-1 MHID 0-07-310590-2 Part of ISBN 978-0-07-333718-0 MHID 0-07-333718-8

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...ividend for next year= Div1 = $3.60

required return on equity= r= 13%

growth rate of dividends= g= 4.50%

Current stock value= Po= ? To be calculated

Plugging in the values:

Po= $42.35 =3.6/(13.%-4.5%)

Answer: $42.35

2). Stock Valuation: suppose you that a company's stock currently sells for $70 per share and the required return on the stock is 12 percent. You also know that the total return ...