Company Z-prime's earnings and dividends per share are expected to grow by 3% a year. Its growth will stopafter year 4. In year 5 and afterward, it will pay out all earnings as dividends. Assume next year's dividend is$3, the market capitalization rate is 11% and next year's EPS is $10. What is Z-prime's stock price? (Do notround intermediate calculations. Round your answer to 2 decimal places.)Stock price$

Value of stock can be found as the present value of dividends and growth of dividends.Next year…

Answered: Company Z-prime's earnings and…

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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