A stock just paid a dividend (DO) of $0.25. Its dividends are paid monthly and are...

     

Transcribed Image Text:

A stock just paid a dividend (DO) of $0.25. Its dividends are paid monthly and are expected to grow 2.00% per year. Using CAPM, you computed a discount rate (also called 'r. 'k', 'cost of equity, cost of capital, 'required rate of return', etc.) to be 8.00%. After you determine the amount of NEXT YEAR's total dividend (D1), compute the price of the stock today (VO) using the dividend-growth model (DGM). A stock just paid a dividend (DO) of $0.25. Its dividends are paid monthly and are expected to grow 2.00% per year. Using CAPM, you computed a discount rate (also called 'r. 'k', 'cost of equity, cost of capital, 'required rate of return', etc.) to be 8.00%. After you determine the amount of NEXT YEAR's total dividend (D1), compute the price of the stock today (VO) using the dividend-growth model (DGM).

Answer rating: 100% (QA)

SOLUTION 1 Using the dividendgrowth model DGM the price of the stock today VO can be calculated as V... View the full answer