# This ones a little harder. Suppose the current share price for the firm in the previous problem

## Question:

This one’s a little harder. Suppose the current share price for the firm in the previous problem is $44.50 and all the dividend information remains the same. What required return must investors be demanding on Storico stock?

**Data From Previous Problem:**

Storico Co. just paid a dividend of $2.65 per share. The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on Storico stock is 12 percent, what will a share of stock sell for today?

## Step by Step Answer:

**Related Book For**

## Fundamentals of Corporate Finance

**ISBN:** 978-0077861704

11th edition

**Authors:** Stephen Ross, Randolph Westerfield, Bradford Jordan