Warwic Company just paid a dividend of $4.00. You expect the dividend to grow by 3% this year, 4%…

Warwic Company just paid a dividend of $4.00. You expect the dividend to grow by 3% this year, 4%…

Question:

Transcribed Image Text:

Warwic Company just paid a dividend of $4.00. You expect the dividend to grow by 3% this
year, 4% next year and 6% the following year. You have determined the required rate of
return on this stock should be 15%. The stock’s current market price is $62. What would the
terminal growth rate in years four and beyond need to be to justify this price?

Expert Answer:

Answer rating: 100% (QA)

To determine the terminal growth rate in years four and beyond that would justify the current stock
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