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Troy is interested in buying a particular stock whose current dividend per share is $1.30. Troy...

Troy is interested in buying a particular stock whose current dividend per share is $1.30. Troy estimates that the current dividend per share will increase at a rate of 2.45% per year forever. If Troy's estimates are correct, what is the best estimate of the stock price per share if the required rate of return is 16.00%

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Answer #1

Stock Price = [Current Dividend * (1 + g)] / [r - g]

= [$1.30 * (1 + 0.0245)] / [0.16 - 0.0245]

= $1.33 / 0.1355 = $9.83

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