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    sagrin's Avatar
    sagrin Posts: 1, Reputation: 1
    New Member
    		  
    #1

    Sep 18, 2006, 04:33 PM
    Price of stock
    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's Avatar
    bunnyKutty Posts: 60, Reputation: 5
    Junior Member
    		  
    #2

    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
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