Consider a stock that is planning to make its next dividendpayment $3.25. They plan to increase the

Consider a stock that is planning to make its next dividendpayment $3.25. They plan to increase the dividend by 30% for oneyear and then by 15% each year for three years. After that, theywill level off to a constant growth rate of 4% in dividends peryear forever. The required return on the stock is 15%. 1.Trace stock price, dividend yield, and capital gains yield foreach year from today until 10 years from now. Explain what ishappening with each of these at different points in time. 2. Suppose that the actual price of this stock today (the marketprice) is $25. What is the implied required return on thestock? . . .

 

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