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A stock is expected to pay its first annual dividend in 5 years. The dividend is expected to stay constant at $1.4 per year
A stock is expected to pay its first annual dividend in 5 years. The dividend is expected to stay constant at $1.4 per year for 20 years and then grow at 5% annually forever. The required rate of return is 14%. (hint: non-standard dividends; two-stage of dividends) What is the PV today of the first-stage dividends? (20 years of constant $1.4 dividend per year is the first stage) 2+ decimals What is the PV today of the second-stage dividends? (dividends after the 20 years of constant dividend is the second stage) 3+ decimals What should be the stock price now?
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