Question

In: Accounting

Today’s dividend (year 0) is 0.286. Assume dividend will grow at 32% for three years, then...

Today’s dividend (year 0) is 0.286. Assume dividend will grow at 32% for three years, then

13% afterwards. The required rate of return is 13%. What is the stock price today using the

dividend growth model?

Solutions

Expert Solution

This problem will be solved using Multistage Dividend Growth Models. In this method present value of dividend expected during the high growth period to the present value of the constant growth value of the firm at the end of the high growth period.


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