Since it started business 10 years ago

Since it started business 10 years ago

Problem 7.8: Since it started business 10 years ago, Alphafem Company has paid a constant $1.20 per share dividend to its common stockholders. Next year and every year thereafter, the company plans to increase the dividend at a constant rate equal to 2.5% per year. If investors require a 15% rate of return to purchase Alphafem’s common stock, what is the market value of its common stock?

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Problem 7.9: Suppose your company is expected to grow at a constant rate of 6% long into the future. In addition, its dividend yield is expected to be 8%. If your company expects to pay a dividend equal to $1.06 per share at the end of the year, what is the value of your firm’s stock?


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