Stock under the discounted cash flow model

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Reference no: EM131866083

Applebutter Phone, Inc. does not currently pay a dividend but it is expected that the firm will begin paying a dividend five years from now. Analysts predict that when it does begin paying dividends, the first dividend will be $3.75 and that dividend will grow at a long-term constant rate of 8.2 percent. If your required rate of return for stocks like this is 11.9 percent, what is the most you should be willing to pay for a share of Applebutter today?

ABC expects to pay a dividend one year from now of $1.9. The dividend exhibits constant growth of 7.6%, and the current price of the stock is $67.65. Given all of this information, what is the expected rate of return for this stock under the discounted cash flow model?

Reference no: EM131866083

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