Answered>Order 88

According to Value Line Investment Survey, the growth rate in dividends for IBM for the next 5 years is expected to be 19.5%. Suppose IBM meets this growth rate in dividends for the next 5 years and then the dividend growth rate falls to 5% indefinitely. Assume investors require an 11% return on IBM stock. Is the stock priced correctly? What factors could affect your answers.

According to Value Line Investment Survey, the growth rate in dividends for IBM for the next 5 years is expected to be 19.5%. Suppose IBM meets this growthrate in dividends for the next 5 years…