The ABC Co. has paid annual dividends of $0.30, $0.64, $1.20, and $1.45 over the past...

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The ABC Co. has paid annual dividends of $0.30, $0.64, $1.20, and $1.45 over the past...

The ABC Co. has paid annual dividends of $0.30, $0.64, $1.20, and $1.45 over the past four years. Dividends in the future are expected to grow at a constant rate of 3.5%. Which one of the following formulas should be used to compute the value of the stock today?

a. P₀ = D₁/(1 + r)¹+ D₂/(1 + r)²... + D_n/(1 + r)ⁿ+ P_n/(1 + r)ⁿ

^b. P₀ = D/r

c. P₀ = D₁/(1 + r)ⁿ+ g

d. P₀ = D₁/(r - g)

P₀ = D₁/(r - g)ⁿ

business finance

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