bideo 2

Suppose D0=1 and D1=51.07 and it is expected that earnings and dividends will grow at a constant rate of 6.50% per year and that the stock's price wil grow at this same rate. Let us assume that the stock is fairly priced and the required rate of return is 11.00%. When the growth rate is vears from today P0(gr1)6P0(1+g)661D2R1(1+g)6 the required rate of retum, you can use the following formula to calculate the price of the stock 6 And the price of the stock 6 years from today is Step 3: Practicet Constant Growth valuation Now it's time for you to practice what youve leamed. Suppose that a stock is expected to pay a dividend of \$4.70 at the end of this year and it is expected to grow at a constant rate of 6.50ns, a vear if it is required return is 11.00%. What is the stock's expected price 6 years from todsy? $34.70 $98.07 $152.39