Primula Corporation (PRM) just paid a dividend of $3.25. Analysts expect that dividend to grow over the next 5 years at 5% per year. PRM's cost of equity is 8%. After 5 years, PRM intends to set a fixed (i.e., unchanging) dividend at $4.50 and expects the internal growth rate to decline to 3% as a result. What is the value of the stock today? Please draw a clearly marked number line. Do you have any reservations about using the Dividend Discount Model (DDM) for pricing a stock? If so, why?

Answer rating: 100% (QA)

PRM Stock Valuation Using Dividend Discount Model DDM Heres how to find the value of PRM stock today ... View the full answer