You expect a firm to pay growing dividends (g = 0.02 = 2%). You require a 12% rate of return. If the next dividend will be $2.50, what is the stock price today?
Current price=D1/(Required return-Growth rate)
=2.5/(0.12-0.02)
which is equal to
=$25
You expect a firm to pay growing dividends (g = 0.02 = 2%). You require a...
If a firm is expected to pay a dividend of $2 this year (div0) and they expect dividends to grow by 5% per years, what is the theoretical price of that firms stock according to the dividend discount model if you have a 10% required return?
QUESTION 4 "You expect Caterpillar will pay dividends of 2.25 in one year, 2.50 in two years, and 2.75 in three years. From that point onwards, dividends will grow at 7% per year. Investors' required rate of return is 12%. According to the Dividend Discount Model, what should be Caterpillar's stock price?"
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