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Duff Inc. paid a 2.69 dollar dividend today. If the dividend is expected to grow at a constant 3 percent rate and the required rate of return is 5 percent, what would you expect Duff's stock price to be 4 years from now?

Respuesta :

jepessoa

Answer:

$155.92

Explanation:

Divā‚€ = $2.69

Divā‚ = $2.7707

Divā‚‚ = $2.8538

Divā‚ƒ = $2.9394

Divā‚„ = $3.0276

Divā‚… = $3.1184

we need to calculate the stocks terminal value in year 4, and to do that we will use Divā‚… and the growing perpetuity formula:

stock price = $3.1184 / (5% - 3%) = $155.92

if we wanted to calculate the current stock price we would use Divā‚ in the same formula.

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