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Generalized dividend pricing model

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1) Using the Generalized Dividend Pricing Model, solve for the present value of a stock that pays $4 in dividends per year and you can expect to sell for $40 at any time in the future. You have an internal interest rate of 7%

a. What is the present value if you plan to hold the stock for one year?

b. What is the present value if you plan to hold the stock for 3 years?

c. What is the present value if you plan to hold the stock for 5 years?

2) Using the Gordon Growth Model, solve for the present value of each type of stock. Your internal rate of return is 10%.

a. $3 annual dividends that grow at 4% per year

b. $2 annual dividends that grow at 5% per year

c. $1 annual dividends that grow at 6% per year

Reference no: EM131904583

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