Suppose a stock’s annual dividends per share have been growing at a constant rate and will continue to grow at this same constant rate forever. A sampling of three past dividends and the most recent dividend are shown below. D-3 = $2.10 (D-3 represents the dividend paid three years ago.) D-2 = $2.205 D-1 = $2.31525 D0 = $2.4310125 Suppose also that E[RM] = 12%, RF = 7%, β = 1.6 Find P0, the current price of the stock.
Suppose a stock’s annual dividends per share have been growing at a constant rate and will continue to grow at this same constant rate forever. A sampling of three past dividends and the most recent dividend are shown below. D-3 = $2.10 (D-3 represents the dividend paid three years ago.) D-2 = $2.205 D-1 = $2.31525 D0 = $2.4310125 Suppose also that E[RM] = 12%, RF = 7%, β = 1.6 Find P0, the current price of the stock.
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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- (Stock Valuation Problem 1)
Suppose a stock’s annual dividends per share have been growing at a constant rate and will continue to grow at this same constant rate forever. A sampling of three past dividends and the most recent dividend are shown below.
D-3 = $2.10 (D-3 represents the dividend paid three years ago.)
D-2 = $2.205
D-1 = $2.31525
D0 = $2.4310125
Suppose also that E[RM] = 12%, RF = 7%, β = 1.6
Find P0, the current price of the stock.
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