What is the maximum you should pay for this stock

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Reference no: EM13808248

Presently, Stock A pays a dividend of $2.00 a share, and you expect the dividend to grow rapidly for the next four years at 20 percent. Thus the dividend payments will be

Year Dividend

1 $1.20

2 1.44

3 1.73

4 2.07

After this initial period of super growth, the rate of increase in the dividend should decline to 8 percent. If you want to earn 12 percent on investments in common stock, what is the maximum you should pay for this stock?

Reference no: EM13808248

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