Current price = D1 / (Rs - g)
Current price = $0.50 / (0.13 - 0.07)
Current price = $8.33
If the stock is in a constant growth state, the constant dividend growth rate is also the capital gains yield for the stock and the stock price growth rate. Hence, to find the price of the stock four years from today:
P4 = P0(1 + g)4
P4 = $8.33(1.07)4
P4 = $10.92
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