CFIN -STUDENT EDITION-W/ACCESS >CUSTOM<
6th Edition
ISBN: 9780357753118
Author: BESLEY
Publisher: CENGAGE C
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Chapter 7, Problem 8PROB
Summary Introduction
The company has paid a dividend of $1.20 which is expected to grow continuously at a rate of 2.5% in perpetuity. The required
Value of the stock when the dividends are growing at a constant rate is
P0=D1rs−g=D0(1+g)rs−gwhere,D1=dividend paid next yearD0=dividend paid this yearrs=required rate of returng=growth rate of dividend in perpetuity
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