What should be the value of xyz stock

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Problem 1: You have been asked to value company AMG's stock. You are told to assume that it will pay its first dividend 5-years from today and that it will be $1.50 per share (at t=5). You also assume dividends will grow at a rate of 5%/year thereafter (i.e the t=6 dividend paid is 5% larger than the t=5 dividend, etc) in perpetuity (i.e forever). What should be the value of XYZ's stock under these assumption assuming 9% required rate of return?

Reference no: EM132988458

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