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Stock is now selling at $65 per share and you are thinking of buying. It will pay a divident of $2 one year from today.
Stock is now selling at $65 per share and you are thinking of buying. It will pay a divident of $2 one year from today. You plan to keep for investment and to never sell it. Dividend is expected to grow at a rate of 12% per year for first 3 years and then grow at a rate of 8% from the 4th year onwards. Required return (or cost of equity) is 11%.
1) what is the fair value of the stock?
2) Should you buy it at $65 or not?
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