Answer:
Stock price = $35.425
Explanation:
According to the dividend growth model, the price of a stock is the present value of expected dividend discounted at the required rate of return.
This is done as follows:
Price of a stock = D×(1+r)/(r-g)
g- 3.1%, r -12.5
D×(1+r) = 3.33,Note that the dividend payable in year one = 3.33. We don't need to grow the dividend again. D stands for dividend in year O.
Price of stock
= 3.33/(0.125-0.031)
= $35.425
Stock price = $35.425
Answer:
Stock price $35.43
Explanation:
The dividend discount model calculated the price of a company's stock on assumption that its current price is equal to the sum of all of its future dividend payments when discounted back to their present value.
P = D1/ r - g
D1 $3.33 g 3.1% r 12.5% P ?
P = 3.33/ 0.125-0.031
= $35.43
