Question
3. Stock valuation. Your task is to find the value of the stock given the following forecasts about the dividends: The company has just paid
3. Stock valuation. Your task is to find the value of the stock given the following forecasts about the dividends: The company has just paid out 8EUR per share as dividends to its investors. For the next four years, the forecasted dividends are also 8EUR each year. However, after four years, the dividends are expected to exhibit a negative growth (e.g. decline) by 4% per year. The required return, given the level of risk, from an investment into stock is 14%. Find the value of stock. If the current stock price is 60 euros, would you recommend buying this stock? Why?
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