- Suppose that a stock just paid a dividend of $7. We expect that this dividend will grow at a 2% rate indefinitely. - The required return on the stock is 12%. What should be the stock price today? - Apply the dividend growth formula (growing perpetuity) but don't forget: we don't want to include dividends that have already been paid in the price (why not?) - Numerator of the formula should be the $7(1+g)