Assume Gillette Corporation will pay an annual dividend of $0.63 one year from now. Analysts expect this dividend to grow at 12.4% per year thereafter until the 4th year. Thereafter, growth will level off at 1.8% 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 8.4%? The value of Gillette's stock is $☐ (Round to the nearest cent.)
Assume Gillette Corporation will pay an annual dividend of $0.63 one year from now. Analysts expect this dividend to grow at 12.4% per year thereafter until the 4th year. Thereafter, growth will level off at 1.8% 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 8.4%? The value of Gillette's stock is $☐ (Round to the nearest cent.)
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
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Assume Gillette Corporation will pay an annual dividend of $0.63 one year from now. Analysts expect this dividend to grow at 12.4% per year thereafter until the 4th year. Thereafter, growth will level off at 1.8% 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 8.4%?
The value of Gillette's stock is $☐ (Round to the nearest cent.)
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