Question
Suppose TB Pirates, Inc. is expected to pay a $2 dividend in one year. If the dividend is expected to grow at 5% per year
Suppose TB Pirates, Inc. is expected to pay a $2 dividend in one year. If the dividend is expected to grow at 5% per year and the required return is 20%, what is the price today?
P0 = 2 / (.2 - .05) = $13.33 My question isWhy isnt the $2 in the numerator multiplied by (1.05) in this example?
If P0 = D1 / r - g
Isn't D1 $2*1.05 ? and D0 is $2
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Equity Asset Valuation
Authors: Jerald E. Pinto, Elaine Henry, Thomas R. Robinson, John D. Stowe, Abby Cohen
2nd Edition
978-0470571439
