Chapter 10, Problem 30P

Maxwell Communications paid a dividend of $\text{\$3}$ last year. Over the next 12 months, the dividend is expected to grow at 8 percent, which is the constant growth rate for the firm (g). The new dividend after 12 months will represent $D_1$ . The required rate of return $(K_e)$ is 14 percent. Compute the price of the stock $(P_0).$