You believe that a corporation’s dividends will grow 5% on average int
You believe that a corporation’s dividends will grow 5% on average into the foreseeable future. If the company’s last dividend payment was $5 what should be the current price of the stock assuming a 12% required return?
What will be an ideal response?
ANSWER
Use the Gordon Growth Model.
$5(1 + .05 )/(.12 – .05 ) = $75
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