Problem 1: Feinstein's Breweries currently (d0) pays a $1.00 common stock dividend. Dividends have been recently growing at a 10 percent annual rate and are expected to continue growing at this rate for the next three years. Thereafter the growth rate is expected to be 5 percent for the foreseeable future.
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Current Dividend
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$1.00
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1st Growth Rate
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10%
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2nd Growth Rate
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5%
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Required Rate of Return
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13%
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What is the current value of Feinstein's Breweries' common stock to an investor requiring a 13% rate of return?
Problem 2: Brooksman's High Roller Casinos currently (d0) pays $5.00 common stock dividend. Dividends have been recently growing at a 12 percent annual rate and are expected to continue growing at this rate for the next four years. Thereafter the growth rate is expected to be 6 percent for the foreseeable future.
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Current Dividend
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$5.00
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1st Growth Rate
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12%
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2nd Growth Rate
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6%
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Required Rate of Return
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15%
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What is the current value of Brooksman's High Roller Casinos common stock to an investor requiring a 15% rate of return?