9. The stock of Robotic Atlanta Inc. is trading at $ 26.88 per share. In the past, the firm has paid a constant dividend

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9. The stock of Robotic Atlanta Inc. is trading at $ 26.88 per
share. In the past, the firm has paid a constant dividend of $ 5.46
per share and it has just paid an annual dividend (i.e., D0 = 5.46
). However, the company will announce today new investments that
the market did not know about. It is expected that with these new
investments, the dividends will grow at 3.3 % forever. Assuming
that the discount rate remains the same, what will be the price of
the stock after the announcement?
Your Answer:
10. Joven Corp. is a young start-up company and therefore
is not paying any dividends on the stock over the next 4
years. At the end of year 4, the company will pay a $3
dividend. The company will pay a $1.70 per share dividend at
the end of year 5 and thereafter it will increase the dividends by
5% per year forever. If the required rate of return on this stock
is 7%, what is the current (today’s) share price? Show your
answer to the nearest $.01. Do not use the $ or , signs in
your answer.
Your Answer: