You need to calculate the stock price (per share) of RSM, a financial company. RSM has just paid $3 per share in dividends. You estimate that dividends will grow at 20% per year for the next three years, at 10% per year for the following two years (years 4 and 5), and then at 5% per year perpetually. The cost of equity is 9.5% per year. What should be the stock price of RSM three years from now (right after the dividend at the time is paid)? What should be today's stock price of RSM? Show your steps.

Answer rating: 100% (QA)

To calculate the stock price of RSM three years from now and today we can use the dividend discount ... View the full answer