A stock is expected to pay its first annual dividend in 3 years. The dividend is expected to stay constant at $1.7 per year for 22 years and then grow at 5% annually forever. The required rate of return is 12%. (hint: non-standard dividends; two-stage of dividends) What is the PV today of the first-stage dividends? (22 years of constant $1.7 dividend per year is the first stage) What is the PV today of the second-stage dividends? (dividends after the 22 years of constant dividend is the second stage) What should be the stock price now?

A stock is expected to pay its first annual dividend in 3 years. The dividend is expected to stay constant at $1.7 per year for 22 years and then grow at 5% annually forever. The required rate of return is 12%. (hint: non-standard dividends; two-stage of dividends) What is the PV today of the first-stage dividends? (22 years of constant $1.7 dividend per year is the first stage) What is the PV today of the second-stage dividends? (dividends after the 22 years of constant dividend is the second stage) What should be the stock price now?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 3P

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