King Waterbeds has an annual cash dividend policy that raises the dividend each year by 4%. The most recent dividend, Div 0, was $ 0.40 per share. What is the stock's price if a. an investor wants a return of 5%? b. an investor wants a return of 8%? c. an investor wants a return of 10%? d. an investor wants a return of 13%? e. an investor wants a return of 20%?

a) $42

b) $10.5

c) $7

d) $4.67

e)$2.63

Explanation:

We can use the Gordon Growth Model of Stock Valuation to find out these answers.

The formula is,

P = D1 / r – g.

D1 = the annual expected dividend of the next year.

r = rate of return.

g = the expected dividend growth rate (assumed to be constant)

To calculate Next year's dividend (D1) we can use the growth rate as follows,

D1 = D0 (1+g)

D1 = 0.4 (1+0.04)

D1 = $0.416

D1 = $0.42

Now that we have D1 we can use it for all the questions.

a) an investor wants a return of 5%

= D1 / r – g.

= 0.42 / 0.05 - 0.04

= $42

b) investor wants a return of 8%

= D1 / r – g

= 0.42/ 0.08 - 0.04

= $10.5

c) investor wants a return of 10%

= D1 / r – g

= 0.42 / 0.1 - 0.04

= $7

d) investor wants a return of 13%

= D1 / r – g

= 0.42 / 0.13 - 0.04

= $4.67

e) investor wants a return of 20%

= D1 / r - g

= 0.42 / 0.2 - 0.04

= $2.63

If you need any clarification do react or comment.

someone i feel is a leader in my life id have to say would be my mother because she has give me great advice in life and got me out of tough situations. some characteristics she has are creativity, honesty, commitment, respect for others, and communication. one example of a situation when she demonstrated leadership was when i was working late on homework and i started to get stressed and got upset, she asked me if i needed some , and she me with my work. she demonstrated communication and commitment.

i don't know if this is exactly what your looking for but i hope this !

answerprotecting competitors;