Explain Stock Valuation with constant growth rates in the dividends
DPS calculation-
1. Warr Corporation just paid a dividend of $1.25 a share (i.e., D0 = 1.25. The dividend is expected to grow 12% a year for the next 3 years and then at 5% a year thereafter. What is the expected dividend per share for each of the next 5 years? Round the answers to the nearest hundredth.
a. D1 =
b. D2 =
c. D3 =
d. D4 =
e. D5 =
Constant growth valuation-
2. Constant growth valuation Thomas Brothers is expected to pay a $3 per share dividend at the end of the year (i.e., D1 = $3). The dividend is expected to grow at a constant rate of 6% a year. The required rate of return on the stock, rs, is 19%. What is the stock's value per share?
Round the answer to the nearest hundredth.