What will the price be at the end of year

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Global Corns Company's (GCC) latest annual dividend of RM1.25 a share was paid yesterday and maintained its historic 7 percent annual rate of growth. You plan to purchase the stock today because you believe that the dividend growth rate will increase to 8 percent for the next three years and the selling price of the stock will be RM40 per share at the end of that time. Show all your working steps.

i. How much you should be willing to pay for the GCC stock if you require a 12 percent return?

ii. What is the maximum price you should be willing to pay for the GCC stock if you believe that the 8 percent growth rate can be maintained indefinitely and you require a 12 percent return?

iii. If the 8 percent rate of growth is achieved, what will the price be at the end of year 3, assuming the conditions in part (ii)?

Reference no: EM133059665

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