Bolment Co. just paid a dividend of $3.25. Future dividends are expected to grow by 3.5%...

Bolment Co. just paid a dividend of $3.25. Future dividends are expected to grow by 3.5% per year. If the required return is 7.8%, then what do you expect the price of the stock to be in 3 years? (NOTE: Round your answer to the nearest cent)

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Expert Solution

Current price=D1/(Required return-Growth rate)

=(3.25*1.035)/(0.078-0.035)

=$78.2267442(Approx)

P3=Current price*(1+Growth rate)^3

=78.2267442*(1.035)^3

=$86.73(Approx)

jeff jeffy answered 2 years ago

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