Suppose that a company pays annual dividends that are expected to grow at a constant rate...

Suppose that a company pays annual dividends that are expected to grow at a constant rate of 6% per year forever. The company just paid a dividend of $2. If the market requires an annual return of 14% on this stock, what should we expect the price to be in 5 years?

Expert Solution

Div6 = Div0 * (1 + g)⁶

Div6 = $2 * (1 + 6%)⁶ = $2.837038

jeff jeffy answered 2 years ago

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