1a) company T stock has just paid its most recent dividend of $2.00. the year end...
1a) company T stock has just paid its most recent dividend of $2.00. the year end dividends are expected to decline at 5% per year forever. with a required return of 14%, what is the expected price in 2 years?
b) what is the expected price today ?
Homework Answers
D1= 2*95% = 1.90
D2 = 1.90*95% = 1.81
D3 = 1.81*95% = 1.71
price at time 2 = D3/(k-g) = 1.71/(14%-(-5%))
= 9.03
Price today = D1/(k-g)
=1.9/(14%+5%)
= $10
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