(Answered) Market rate of return on stock

Management Studies

Problem: HiDo, Inc., is a specialty company in a niche market. Based on their latest projections, the company expects to increase their annual dividend by 40% per year for the next two years and by 10% for the following year. After that, the company plans to pay a constant dividend of $1.00 a share. The last dividend they paid was $0.40 a share.

Required:

Question: What should you expect to pay per share if the market rate of return on this stock is 16%? Please show steps how you get an answer and please be clear in your explanation.

a. $7.11

b. $4.84

c. $4.44

d. $5.62

e. $4.18

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