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Seitz Glassware is trying to determine its growth rate for an annual cash dividend. The most recent​ dividend, Div 0​, was $ 0.25 per share. The​ stock's target return rate is 10​%. What is the​ stock's price if a.  the annual growth rate is 1​%? b.  the annual growth rate is 3​%? c.  the annual growth rate is 5​%? d.  the annual growth rate is 7​%? e.  the annual growth rate is 9​%?

Respuesta :

Answer:

At a growth rate of 1%, price of share $2.78

At a growth rate of 3%, price of share $3.57

At a growth rate of 5%, price of share $5.00

At a growth rate of 7%, price of share $8.33

At a growth rate of 9%, price of share $25.00

Explanation:

The formula for computing share price at each growth rate is  dividend/(rate of return-growth rate) as shown in the attached spreadsheet.

Note that the higher the dividend growth rate the higher the share price as share price was at the highest at a growth  rate of 9%

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