Market expectation of the growth rate of mbi dividends

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Reference no: EM132046134

Computer stocks currently provide an expected rate of return of 19%. MBI, a large computer company, will pay a year-end dividend of $5 per share.

Requirement 1:

If the stock is selling at $52 per share, what must be the market's expectation of the growth rate of MBI dividends? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Growth rate %

Requirement 2:

(a) If dividend growth forecasts for MBI are revised downward to 5% per year, what will happen to the price of MBI stock?

(b) What (qualitatively) will happen to the company's price–earnings ratio?

Reference no: EM132046134

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