1) The Jackson- Timberlake Wardrobe Co. just paid a dividend of $1.45 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year indefinitely. If investors require a return of 11 percent on The Jackson- Timberlake Wardrobe Co. stock, what is the current price? What will the price be in three years? 15 years?
2) Staal Corporation will pay $3.40 per share dividend next year. The company pledges to increase its dividend by 4.5 percent per year indefinitely. If you require a return of 11 percent on your investment, how much will you pay for a company’s stock today?