dividend payout

ninogmiranda · August 9th, 2004, 1:55 pm

Can anyone answer this?A firm will pay a cash dividend of $1.00 per share at the end this year and then pay dividneds in alternate years only. The next dividend will therefore be paid at the end of the 3rd year. Each dividend amount is 10% larger than the previous DPS ,i.e., the next dividend is $1.10 (note that the annual growth rate in DPS is not 10%). The stock is currently selling for $10. Show that the shareholder's required rate of return is exactly 10% per year.Thanks

DavidJN · August 9th, 2004, 6:53 pm

Sounds like you are asking others to do your homework for you, no?

ninogmiranda · August 9th, 2004, 7:01 pm

something like that.. It realy a challenge question for us

Dook · August 10th, 2004, 1:24 pm

Why don't you try discounting the future dividend payments with a certain interest rate