Pharmecology is about to pay a dividend of $1.35 per share. It’s a mature company, but future EPS and dividends are expected to grow with inflation, which is forecasted at 2.75% per year.

a. What is Pharmecology’s current stock price? The nominal cost of capital is 9.5%.

b. Redo part

(a) using forecasted real dividends and a real discount rate.

AppendixLO1