Heard, Inc., just paid a dividend of $8.4 per share on its stock. The dividends are...

Heard, Inc., just paid a dividend of $8.4 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year, in- definitely. If investors require a 12 percent return on Heard stock, what is the current price? What will the price be in three years? In 15 years?

Expert Solution

P0 = D0(1 + g) / (r - g) = $8.4(1 + 0.06) / (0.12 - 0.06) = $148.40

P3 = P0(1 + g)^3 = $148.40(1 + 0.06)^3 = $176.75

P15 = P0(1 + g)^15 = $148.40(1 + 0.06)^15 = $355.65

jeff jeffy answered 2 years ago

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