Answer:
When the required return is 15.5%, the Limited Brands stock will be at $36.8875
Explanation:
Required return i = 15.5% = 0.155
Future Growth Rate g = 13.5% = 0.135
Dividend D₀ = $ 0.65
so let say the value of stock at that time = X
X = D₀ (1 + g) / (i - g)
X = 0.65 * (1 + 0.135) / (0.155 - 0.135)
= (0.65 * 1.135) / (0.155 - 0.135)
= 0.73775 / 0.02
= $36.8875
Therefore, when the required return is 15.5%, the Limited Brands stock will be at $36.8875
