PROBLEM p&g will pay an annual dividend of 0.65$ one year from now. analyst expect this dividend to grow at 12% per year thereafter until year 5 . after then growth will level of 2% per year . According to the dividend discount model what is the value of the share if the firm equity cost of capital is 8% ?
My solution ( which is wrong and i ask you why )
make pv = div 1/(1+re)^1 , div2/(1+re)^2 ... until year 5 then at year 5 div5*(1+g)/(r-g)
sum all these periods to get the NPV = share price
where is the mistake? Thank you !
The value of a share is the... View the full answer
Sign up to view the full answer
Dividend Growth Model: It is one of the methods used for the valuation of stock price of a company on the... View the full answer