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Sky High Co. just paid a dividend of $4.6 per share on its stock (D0). The...

Sky High Co. just paid a dividend of $4.6 per share on its stock (D0). The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. If investors require an 11.6 percent return on Sky High Co. stock, the stock price in 8 years should be $ _________ . Round it to two decimal places, and do not include the $ sign, e.g., 23.56.

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Answer #1

Current price=D1/(Required return-Growth rate)

=(4.6*1.04)/(0.116-0.04)

=$62.94736842

Hence P8=Current price*(1+Growth rate)^8

=$62.94736842*(1.04)^8

=86.15(Approx).

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