Fight Finance

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Question 199  NPV, DDM, no explanation

A stock is expected to pay the following dividends:

Cash Flows of a Stock
Time (yrs) 0 1 2 3 4 ...
Dividend ($) 0 6 12 18 20 ...
 

After year 4, the dividend will grow in perpetuity at 5% pa. The required return of the stock is 10% pa. Both the growth rate and required return are given as effective annual rates.

What will be the price of the stock in 7 years (t = 7), just after the dividend at that time has been paid?




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