A company just paid a dividend of $5. It plans to grow the dividend by 9% next year, by 8% in two years and 10% the third year. At the beginning of the fourth year it will grow by 2% forever. If the required rate of return is 6%. What is the value of the stock today?
Added by Richard L.
Step 1
The dividend for the first year is $5. The dividend for the second year is $5 * 1.09 = $5.45. The dividend for the third year is $5.45 * 1.08 = $5.89. The dividend for the fourth year and beyond is $5.89 * 1.1 = $6.48. Show more…
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