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What should be the current price of this stock

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Reference no: EM132800141

Problem - You are trying to determine the appropriate price to pay for a share of common stock. If you purchase this stock, you plan to hold it for 1 year. At the end of the year, you expect to receive a dividend of $2.50 and to sell the stock for $55.5. The appropriate rate of return for this stock is 16 percent.

Required -

1. What should be the current price of this stock?

2. What is the growth rate of the dividend if we assume a constant growth rate g forever?

Reference no: EM132800141

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