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TLC Corp. will pay an annual dividend tomorrow of $2.23. The market expects a return of...

TLC Corp. will pay an annual dividend tomorrow of $2.23. The market expects a return of 9%, and you expect TLC will grow at 4.8%. With these assumptions, what is the price you are willing to pay for the stock?

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Answer #1
Price = recent dividend* (1 + growth rate )/(cost of equity - growth rate)
Price = 2.23 * (1+0.048) / (0.09 - 0.048)
Price = 55.64

Price today = price tomorrow+dividend = 55.64+2.23

=

57.87
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