Finance help please??

Question

Woidtke Manufacturing’s stock currently sells for $20 a share. The stock just paid a dividened of $1.00 a share (i.e.,Do=$1.00). The dividend is expected to grow at a constant rate of %10 a year. What stock price is expected 1 year from now? What is the required rate to return on the company’s stock??

Answer 1

$21.00 would be my school theory.

Reality.

The price of a stock will drop equal to the dividend on the ex-dividend date.

http://www.investopedia.com/articles/02/...

The value of the stock will be determined by market forces, primarily earnings and future earnings, sales, revenues, etc., future outlook. Thus one can't realistically expect to guess the future value of a stock based on the dividend.

Recent History.

The higher the dividend rate (%), the higher the risk in the stock.

Example: Every bank stock paying a dividend who has not already cut the dividend: Result, the higher % dividend, the  lower the stock price.

Answer 2

To be honest. Right now I cantimagine what stock generates interest at 10%. Maybe a few years from now. Have you LOOKED at the market lately? Try a low risk account to start.