If the last dividend paid by Chemical Brothers Inc.was $1.25 and analysts expect these payments to increase 4% per year,what will the stock price be next year if the required return is 15%?

Question

Quizplus · Accepted Answer

Step 1 - Calculate the next dividend payment.
1.25 × (1.04) = $1.30
Step 2 - Plug the next dividend payment into the Gordon Model. 11ea7fdb_fbf9_f8b0_a768_e35cadc533d2_TB2902_11 = 11ea7fdb_fbf9_f8b1_a768_cb883e245e16_TB2902_11 11ea7fdb_fbf9_f8b2_a768_ab5fb1c86bc9_TB2902_11 = 11ea7fdb_fbfa_1fc3_a768_89727f054ed8_TB2902_11 = 11.82
Step 3 - Calculate the price of the stock for next year.
11.82 × (1.04) = $12.29

If the Last Dividend Paid by Chemical Brothers Inc