You are asked by the Chief Financial Officer of your firm to predict what the firm's stock price will be exactly 4 years from today.If your firm is expected to grow at 3% indefinitely and the cost of capital is 10% while the expected annual dividend one year from today is $10,then what should be the price of your firm's stock 4 years from today?

Question

Quizplus · Accepted Answer

P4 = (D₁ ´ (1+g)⁴)/ (r - g) P4 = (10 ´ (1.03)⁴)/ (.1 - .03)= 160.79

You Are Asked by the Chief Financial Officer of Your