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Determining the stock price after ten years

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A share of common stock is expected to pay a dividend of $10 in one year (which implies that DIV1E0E10 = $10.00). The stock's dividend is expected to increase at a constant rate of 7% per year (g = 7%), and the required rate of return on the stock, is 13.25% (r = 13.25%). Based on this information and the fact that this is a constant growth stock, what should be the market price of this stock today (find P). Assuming that everything remains constant (which therefore suggests that r = 13.25% and g = 7% going forward), what do you expect this stock's price will be ten years from today (P), or by the year 2031? 

Today's Price (P0) =

Expected Price in 10 Years (P10 = P2031) =

Reference no: EM132814069

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