Question
An analyst has been following American Dream stock. He projects the following dividends for the next three years: YEAR 1 2 3 Dividend $1.68 $2.27
An analyst has been following American Dream stock. He projects the following dividends for the next three years:
| YEAR | 1 | 2 | 3 |
|---|---|---|---|
| Dividend | $1.68 | $2.27 | $3.01 |
The analyst notes that American Dream stock has a required return of 9.86%. The analyst projects that dividends will grow at a constant rate of 4.00% per year after year 3.
What is the current price of the stock if his assumptions are correct?
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Investment Science
Authors: David G. Luenberger
1st International Edition
0195391063, 9780195391060
