Microsoft Corp. will pay a dividend of $2.04 per share next year. Investors anticipate that the...

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Microsoft Corp. will pay a dividend of $2.04 per share next year. Investors anticipate that the...

Microsoft Corp. will pay a dividend of $2.04 per share next year. Investors anticipate that the annual dividends will grow by 2% per year forever, and they require an 12% discount rate. Calculate the value of the stock.

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Answer 1

Answer #1

value of stock = next year dividend / (discount rate - perpetual dividend growth rate)

value of stock = $2.04 / (12% - 2%)

value of stock = $20.40

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Answer 2

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Microsoft Corp. will pay a dividend of $2.04 per share next year. Investors anticipate that the...