How much should you be willing to pay for this stock

Reference no: EM13304271

You are considering the purchase of common stock that paid a dividend of $1.00 yesterday. You expect this stock to have a growth rate of 20 percent for the next 3 years, resulting in dividends of D1=$1.20, D2=$1.44 and D3 = $1.73. The long-run normal growth rate after year 3 is expected to be 8 percent (that is, a constant growth rate after year 3 of 8% per year forever). If you require a 12 percent rate of return, how much should you be willing to pay for this stock? show work. Ans $38.65, $7.24, $36.73, $24.89.

Reference no: EM13304271

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