A company just paid a dividend of $1.50 per share. The consensus forecast of financial analysts is a dividend of $1.90 per share next year and $2.20 per share two years from now. Thereafter, you expect the dividend to grow 5% per year indefinitely into the future. If the required rate of return is 14% per year, what would be a fair price for this stock today? (Answer to the nearest penny.)
As per Dividend Discount Model,
Fair Price of Stock = 1.90/(1.14) + 2.20/(1.14)2+ 2.20(1.05)/(0.14 - 0.05)(1.14)2
Fair Price of Stock = 1.67 + 1.69 + 19.75
Fair Value of Stock = $23.11
A company just paid a dividend of $1.50 per share. The consensus forecast of financial analysts...
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