6. A dividend of D0 = $1.32 has just been paid to you on a share of common stock. You (and other analysts) expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and each year thereafter. The required return on this low-risk stock is 9.00%. What is your best estimate of the stock’s current market value (your belief as to the stock’s intrinsic value)?
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This question was asked on Feb 26, 2012 and answered on Feb 27, 2012.
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