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4. A company has just paid an annual dividend of $5.00 per share. The company will increase its dividend by 30 percent next year.
4. A company has just paid an annual dividend of $5.00 per share. The company will increase its dividend by 30 percent next year. The firm will then reduce its dividend growth rate by 6 percent each year until the dividend reaches the industry average of 6 percent growth. The firm will then maintain that dividend growth rate forever. The annual required rate of return for the company is 14 percent. Find the price of the stock.
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To find the price of the stock we can use the Gordon Growth Model also known as the dividend discoun...Get Instant Access to Expert-Tailored Solutions
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