Suppose D0=1 and D1=$1.05 and it is expected that earnings and dividends will grow at a constant rate of 5.00% per year and that the stock's price will grow at this same rate. Let us assume that the stock is fairly priced and the required rate of retum is 9.00%. When the growth rate is years from today the required rate of return, you can use the following formula to calculate the price of the stock 4 P0(gr1)4 (aag)4D1 r,sD1 P. (1+g)4 And the price of the stock 4 years from today is Step ai Practice: Constent Growth Y,stuatior Now it's time for you to practice what you've le Supocte that a stock is expected to pav divideng Suppose that a stock is expected to pay a dividend of $4.25 at the end of this year and it is expected to grow at a constant rate of 5.00% a year. If it is required return is 9.00%. What is the stock's expected price 4 years from today? $31.91 5101.19 $129.15 $149.98