Dividend discount model to value stock

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Reference no: EM131965882

Assume that you are using the dividend discount model (the Gordon Model) to value stock. The stock currently pays no dividends, but expected to begin paying dividends $3 per share in four years.

Suppose the stock is expected to grow at a rate of 5% for the next six years that it started paying dividends, then slows to a long term growth rate of 3.5%, how much is that stock worth today?

A) >$35

b) <$20

c) $25-$30

D) $30-$35

E) $20-$25

Reference no: EM131965882

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