Lets say you want to purchase shares of Fontaine Ltd. and then hold this stock for six
Question:
Let’s say you want to purchase shares of Fontaine Ltd. and then hold this stock for six years. The company has a stated dividend policy of $2.00 annually per share for the next six years, at the end of which time you will sell the stock. You expect to be able to sell the stock for $35.00 at that time. If you want to earn an 8% return on this investment, what price should you pay today for this stock?
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Constant Growth Dividend Discount Model – This dividend discount model assumes dividends grow at a fixed percentage. They are not variable and are consistent throughout. Variable Growth Dividend Discount Model or Non-Constant Growth model
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