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28 Sep 2019
Suppose a firm's common stock paid a dividend of $2 yesterday. you expect the dividends to grow at a rate of 5% per year forever. the discount rate is 12%. a. you expect the price of the stock 3 years from now to be $34.73. If you buy the stock today and plan to hold it for 3 years, what payments will you recieive? what is the present value of those payments? b. assume g=5% and is constant, calculate the present value of this stock using the constant growth model formula. compare it to your answer in part a. c. is the value of this stock dependent on how long you plan to hold it?
Suppose a firm's common stock paid a dividend of $2 yesterday. you expect the dividends to grow at a rate of 5% per year forever. the discount rate is 12%. a. you expect the price of the stock 3 years from now to be $34.73. If you buy the stock today and plan to hold it for 3 years, what payments will you recieive? what is the present value of those payments? b. assume g=5% and is constant, calculate the present value of this stock using the constant growth model formula. compare it to your answer in part a. c. is the value of this stock dependent on how long you plan to hold it?
Nelly StrackeLv2
28 Sep 2019
