Suppose a firm is expected to increase dividends by 20% in one year and by 15% in two years (e.g. during the second year). After that, dividends will increase at a rate of 5% per year indefinitely. If the last dividend was $1 and the required return is 20%, what is the price of the stock?
Suppose a firm is expected to increase dividends by 20% in one year and by 15% in two years (e.g. during the second year). After that, dividends will increase at a rate of 5% per year indefinitely. If the last dividend was $1 and the required return is 20%, what is the price of the stock?
Chapter7: Stocks (equity) - Characterstics And Valuation
Section: Chapter Questions
Problem 9PROB
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Suppose a firm is expected to increase dividends by 20% in one year and by 15% in two years (e.g. during the second year). After that, dividends will increase at a rate of 5% per year indefinitely. If the last dividend was $1 and the required return is 20%, what is the price of the stock?
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