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A company is growing and doesn't expect to initiate dividents for 10 years, at which time it will pay an annual dividend of $5 per share. At that time, the company expects its dividends to grow at 6% forever. You're interested in purchasing stock from this company if you can earn an 11% required rate of return.

1) If you buy the company's stock today and hold it for 10 years, what would you expect the price to be at that time?

2) What is the most you would pay today for one share of the company's stock?

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Financial Management, Finance

Category:- Financial Management
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