Question
Constant Growth Model You are considering an investment in XYZ Corporations stock, which is expected to pay a dividend of $2.25 a share at the
Constant Growth Model
You are considering an investment in XYZ Corporations stock, which is expected to pay a dividend of $2.25 a share at the end of the year (D1 = $2.25) and has a beta of 0.9. The risk-free rate is 4.9%, and the market risk premium is 5%. XYZ currently sells for $46 a share, and its dividend is expected to grow at some constant rate, g. Assuming that the market is in equilibrium, what does the market believe will be the stock price at the end of three years? (That is, whats , P3?).
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
