Question
A stock is trading at $70 per share. The stock is expected to have a year-end dividend of $2 per share (D1 = $2), and
A stock is trading at $70 per share. The stock is expected to have a year-end dividend of $2 per share (D1 = $2), and it is expected to grow at some constant rate gL throughout time. The stock's required rate of return is 11% (assume the market is in equilibrium with the required return equal to the expected return). What is your forecast of gL? Round the answer to three decimal places.
Step by Step Solution
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Step: 1
The constant growth rate of a stock g can be calculated using the Gordon Growth Model formu...
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Corporate Finance A Focused Approach
Authors: Michael C. Ehrhardt, Eugene F. Brigham
4th Edition
1439078084, 978-1439078082
