In: Finance
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)
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)