What is the stock price today

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Reference no: EM132490263

Suppose a stock will pay $10 per share dividend in one year's time. The dividend is projected to grow at 8% the following year, and then 4% per year indefinitely after that.

To clarify, dividend at beginning of year 1 (that is, one year from today) is:  $10

Beginning of year 2 (2 years from today) is:   $10 * 1.08

Beginning of year 3 (3 years from today) is:  $10 * 1.08 * 1.04

and a 4% rate of growth every year after that.

Question 1: The required return is 10%. What is the stock's price today?

Reference no: EM132490263

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