Q5.ABC Corporation has been growing at a rate of 12% per year and it is expected this growth rate in earnings and dividends to continue for another 2 years. The dividend at the end of one year is $3. If the cost of equity is 10%, and the steady growth after three years is 5%, what should be the stock price today?

EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter7: Stocks (equity) - Characterstics And Valuation
Section: Chapter Questions
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Q5.ABC Corporation has been growing at a rate of 12% per year and it is
expected this growth rate in earnings and dividends to continue for another 2.
years. The dividend at the end of one year is $3. If the cost of equity is 10%, and
the steady growth after three years is 5%, what should be the stock price today?
Transcribed Image Text:Q5.ABC Corporation has been growing at a rate of 12% per year and it is expected this growth rate in earnings and dividends to continue for another 2. years. The dividend at the end of one year is $3. If the cost of equity is 10%, and the steady growth after three years is 5%, what should be the stock price today?
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