I tried doing the question I ask. This is what I came up with.

E(Re) = $2.40 * [1 + 12%] / $36
E(Re) = $2.40 * [1.12] / $36
E(Re) = $2.69 / $36
E(Re) = 0.07472

In a situation where dividends are expected to grow indefinitely at some constant rate, it's common to estimate the stock's value with the model...

where denote, respectively, the current price, the next expected dividend, the appropriate discount rate, and the expected growth rate. The next dividend can be expressed as a function of the growth rate g and the most recent dividend , and so the model can be rendered as

... which with your knowns becomes



Solve for g, apply that growth rate to the current price for a 5-year growth period, and call it a day.

Okay, since I can't seem to find an Edit command anywhere, the second instance of the formula above should read

.

My bad.