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Assume Stanton Corporation will pay an annual dividend of $0.65 one year from now. Analysts expect this dividend to grow at 12% per year thereafter
Assume Stanton Corporation will pay an annual dividend of $0.65 one year from now. Analysts expect this dividend to grow at 12% per year thereafter until the fifth year. After then, growth will level off at 2% per year. The firms equity cost of capital is 8%. Use the dividend-discount model to answer the following questions. What is the value of a share of Stanton stock now? If the firms share price is currently trading at $13, will you sell or buy the shares?
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