Stock Valuation using a Dividend Discount Model

Roadrunner Enterprises is expected to grow its dividends and earnings at various rates. The company just paid a cash dividend of $3.00 per share. The company expects to grow its dividend at 13% for the next two years, then at 11% for the following three years,after which the company expects to grow at a constant rate of 9% per year forever.

If the required rate of return on Roadrunner's common stock is 10%, then what is the fair Market Value (FMV)of the stock now?

  

Please estimate to the nearest penny.

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FMV or Fair Market Value now =

If the stock now trades at $75.00 per share, is it rich or cheap?

Answer rating: 100% (QA)

SOLUTION To calculate the fair market value FMV of Roadrunner Enterprises stock using a dividend dis... View the full answer