What is the price of the stock in year 5

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Consider a firm that has just paid a dividend of $2. An analyst expects dividends to grow at a rate of 8% per year for the next 5 years. After that dividends are expected to grow at a normal rate of 5% per year. Assume that the appropriate discount rate is 7%.

1. Calculate the dividends for years 1,2 and 3.

2. What is the price of the stock in year 5?

3. Calculate the present value today of dividends for years 1 to 5.

Reference no: EM132525359

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