What would you calculate the price to pay for a stock with 13% required rate of return, 4% rate of dividend growth, and an annual dividend of $2.50 which will be paid tomorrow?
bunnyKutty
May 21, 2007, 09:39 PM
Cost of equity Ke = D1/P0 + g
13% = 2.5/P0 + 4%
P0 = 2.5/(13% - 4%)
Price of equity = $27.78