Suppose 3M Pays a Dividend of $2 Per Share Which

question 40

Essay

Suppose 3M pays a dividend of $2 per share which the investor is expected to receive immediately. The dividend is expected to grow by 5% per year and the investor has a required rate of return of 8%. What should be the current price of the stock according to the Gordon-Growth model?

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Definitions:

Epidermis

The outer layer of cells covering an organism, particularly the surface epithelium of the skin on the body of an animal.

Photosynthesis

The process by which green plants, algae, and some bacteria convert light energy, usually from the sun, into chemical energy stored in glucose, using carbon dioxide and water.

Plants

Multicellular organisms that primarily use photosynthesis for energy production and are a key part of the Earth's ecosystems.

Microfibrils

Fine, threadlike components of the extracellular matrix in plants, helping to provide strength and support to the cell wall.