Gentleman Gym just paid its annual dividend of $3 per share, and it is widely expected that

Question:

Gentleman Gym just paid its annual dividend of $3 per share, and it is widely expected that the dividend will increase by 5% per year indefinitely.

a. What price should the stock sell at? The discount rate is 15%.

b. How would your answer change if the discount rate were only 12%? Why does the answer change?

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...