A share of common stock has just paid a dividend of $2.00. If the expected long-run growth rate for this stock is 7%, and if investors require a(n) 11% rate of return, what is the price of the stock? You plan to buy a share of XYZ stock today and to hold it for 2 years. Your do not expect to receive a dividend at the end of Year 1, but you will receive a dividend of $9.25 at the end of Year 2. In addition, you expect to sell the stock for $150 at the end of Year 2. If your expected rate of return is 16%, how much should you be willing to pay for this stock today? Thanks so much...
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use the Gordon Growth Model stock value (p) = D / k-G Where: D = Expected dividend per share one year from now k = Required rate of return for equity investor G = Growth rate in dividends (in perpetuity)
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