8-11: Valuing Common Stocks with the Dividend Growth Model

Problem 8-3 Constant Growth Valuation

Woidtke Manufacturing's stock currently sells for $18 a share. The stock just paid a dividend of $1.25 a share (i.e., D0 = $1.25), and the dividend is expected to grow forever at a constant rate of 6% a year. What stock price is expected 1 year from now? Round your answer to the nearest cent.

$ _____