Currently, Stock A pays a dividend of $2.00 a share, and you expect the dividend to grow rapidly for the next 4 years at 20%. After this initial period of super growth, the rate of increase in the dividend should decline to 8%. If you want to earn 12% on investments in common stock, what is the maximum you should pay for this stock?

Answer rating: 100% (QA)

To calculate the maximum price you should pay for Stock A we can use the dividend discount model DDM ... View the full answer