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You are considering the purchase of common stock that paid a dividend of $2.50 yesterday. You expect this stock to have a growth rate of 10% for the next 3 yrs, resulting in dividends of D1=$2.75, D2=$3.025, and D3=$3.3275. The long-run growth rate after year 3 is expected to be 12%(this is, a constant growth rate after year 3 of 12% per year forever). If you require a rate 15% rate of return, how much should you be willing to pay for this stock?

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Financial Management, Finance

Category:- Financial Management
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