In: Accounting
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?
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.