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The required return on an investment is 10%. You estimate that firm Xs dividend will grow as follows: Year Dividend 1 1.20 2 2.00 3
The required return on an investment is 10%. You estimate that firm Xs dividend will grow as follows: | ||||||
Year | Dividend | |||||
1 | 1.20 | |||||
2 | 2.00 | |||||
3 | 3.00 | |||||
4 | 4.50 | |||||
For the subsequent years you expect the dividend to grow but at the more modest rate of 4% annually. What is the maximum price that should pay for this stock? |
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