SCI just paid a dividend ( D0 ) of $3.12 per share, and its annual dividend is expected to grow at a constant rate (g) of 6.50% per year. If the required return ( rs ) on SCI’s stock is 16.25%, then the intrinsic value of SCI’s shares is per share. Which of the following statements is true about the constant growth model?
The constant growth model can be used if a stock’s expected constant growth rate is less than its required return.
The constant growth model can be used if a stock’s expected constant growth rate is more than its required return. Use the constant growth model to calculate the appropriate values to complete the following statements about Super Carpeting Inc.:
• If SCI’s stock is in equilibrium, the current expected dividend yield on the stock will be per share.
• SCI’s expected stock price one year from today will be per share.
• If SCI’s stock is in equilibrium, the current expected capital gains yield on SCI’s stock will be .
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