Suppose that you expect Carrefour SA (NYSE Euronext Paris: CA) to pay a €0.58 dividend next year. You expect the price of CA stock to be €27.00 in one year. The required rate of return for CA stock is 9 percent. What is your estimate of the value of CA stock?

Discounting the expected dividend of €0.58 and the expected sales price of €27.00 at the required return on equity of 9 percent, we obtain

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D+ 0.58+27.00 27.58 Vo= = 25.30 (1+r) (1+0.09) 1.09