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Stock C is expected to pay a dividend of $5.10 next year. Thereafter, dividend growth is...

Stock C is expected to pay a dividend of $5.10 next year. Thereafter, dividend growth is expected to be 21.00% a year for five years (i.e., years 2 through 6) and zero thereafter. If the market capitalization rate for stock C is 8.00%, what is its stock price?

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Answer #1

Cash flows $5.10 $6.17 $7.47 $9.03 $10.93 $13.23 $165.35 pv @ 8% 0.9259 0.8573 0.7938 0.7350 0.6806 0.6302 0.6302 Present value $4.72 $5.29 $5.93 $6.64 $7.44 $8.34 $104.20 $142.56 Year 2 4 Price at year 6 (13.23*1)/(0.08-0) current price of the stock

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