Suppose that you estimate D₁=$0.72,D₂=$0.76,D₃=$0.84,and D₄=$0.88 for a stock.You also estimate that,beginning at year 4,dividends will grow continually at a rate of 2% per year.If the required return to hold the stock is 14.6%,what is the stock's current price?

Question

Quizplus · Accepted Answer

Selling price at year 4 = $0.88*1.02/(.146-02)= $7.12
Price = $.72/1.146 + $.76/(1.146)^2 + $.84/(1.146)^3 + $8.00/(1.146)^4

Suppose That You Estimate D1=$0

Suppose That You Estimate D₁=$0