Question
A company has just paid $2.00 in its common stock and expects to continue paying dividends, which are expected to grow by 5% each year,
A company has just paid $2.00 in its common stock and expects to continue paying dividends, which are expected to grow by 5% each year, from now to infinity. If the required rate of return for the stock is 9%, calculate the value of the stock.
The answer is 52.50 but I'm looking for an explanation on how to solve it.
Step by Step Solution
3.30 Rating (159 Votes )
There are 3 Steps involved in it
Step: 1
To calculate the value of the stock we can use the dividend discount model which is Stock Valu...
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Financial Management Theory and Practice
Authors: Eugene F. Brigham, Michael C. Ehrhardt
15th edition
130563229X, 978-1305632301, 1305632303, 978-0357685877, 978-1305886902, 1305886909, 978-1305632295
