brooks''s stock, Financial Accounting

Investors need a 15% rate of return on Brooks Sisters' stock (rs = 15%).

a.  What would the value of Brooks's stock be if the last dividend was D0 = $1.5 and if investors expect dividends to grow at a constant compound yearly rate of (1) - 4%, (2) 0%, (3) 2%, or (4) 13%?

b.  Using data from part a, what is the Gordon (constant growth) model's value for Brooks Sisters's stock if the needed rate of return is 15% and the expected growth rate is (1) 15% or (2) 23%? Are these reasonable results? Describe.


Posted Date: 3/30/2013 1:30:23 AM | Location : United States

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