Procter & Gamble is expected to pay a dividend of $3 per share on their common...

Question

Question

Procter & Gamble is expected to pay a dividend of $3 per share on their common stock next year (D1), and dividends are then expected to grow at 4% rate forever into the future? The required rate of return on the stock is 9%.
1. a) What is the current value of Procter & Gamble stock?
2. b) In addition to the regular dividends, Procter & Gamble recently announced that it will pay two special dividends of $4 in each of the next two years. What is the value of the stock? {Hint: Don’t merge the two different dividend streams, do their PV separately.}

Answer 1

Answer #1

a) Current value of stock D1:(n-3) Here, Expected dividend (D1) Required return (r) Growth rate (g) 3 9% 4% Current value of

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Answer 2

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