Chapter 9, Problem 31QAP

Nonconstant Growth Storico Co. just paid a dividend of $\$2.95$ per share. The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on the company’s stock is 13 percent, what will a share of stock sell for today?