Assume Gillette Corporation will pay an annual dividend of $ 0.64 one year from now. Analysts expect this dividend to grow at 11.3 % per year thereafter until the 5th year. Thereafter, growth will level off at 1.9 % per year. According to the dividend - discount model, what is the value of a share of Gillette stock if the firm's equity cost of capital is 7.4 % ?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Assume Gillette Corporation will pay an annual dividend of $ 0.64 one year from now. Analysts expect this dividend to grow at 11.3 % per year thereafter until the 5th year. Thereafter, growth will
level off at 1.9 % per year. According to the dividend - discount model, what is the value of a share of Gillette stock if the firm's equity cost of capital is 7.4 % ?
Transcribed Image Text:Assume Gillette Corporation will pay an annual dividend of $ 0.64 one year from now. Analysts expect this dividend to grow at 11.3 % per year thereafter until the 5th year. Thereafter, growth will level off at 1.9 % per year. According to the dividend - discount model, what is the value of a share of Gillette stock if the firm's equity cost of capital is 7.4 % ?
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