Bavarian Sausage just paid a $1.57 dividend and investors expect that dividend to grow by 5% each year forever.If the required return on the stock investment is 14%,what should be the price of the stock in 5 years?

Name: Bavarian Sausage just paid a $1.57 dividend and investors expect that dividend to grow by 5% each year forever.If the required return on the stock investment is 14%,what should be the price of the stock in 5 years?
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Question

Quizplus · Accepted Answer

D5 = 1.57^5 = 2.00
P5 = 2.00(1.05)/(.14-.05)= 23.33

Bavarian Sausage Just Paid a $1