Sock Value, Time Value of Money
Common stock value-constant growth. McCracken company common stock paid a dividend of $1.20 per share last year. The company expects earnings and dividends to grow at a rate of 5% per year for the forseeable future.
a. What required rate of return for this stock would result in a price per share of $28?
b. If McCracken had both earnings and growth and dividened at a rate of 10% what required rate of return would result in a price per share of 28?
a. $200,000 now or
b. $10,000 a year for 30 years
c. $150,000 at the end of 10 years and another $150, 000 at the end of 20 years