Question
An analyst on Bloomberg News recently commented that Netflix stock will start paying dividends in the near future because of all of the cash flow
An analyst on Bloomberg News recently commented that Netflix stock will start paying dividends in the near future because of all of the cash flow that it generates. When pressed on the issue, the analyst made a bold forecast that Netflix will start paying its first dividend 4 years from now in the amount of $50 per share, after which the growth rate would be a constant rate of 3%, forever. If the appropriate discount rate for Netflix stock is 10%, what should the stock sell for today based on a discounted valuation of the future dividends that the analyst has projected?
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