4, let's imagine that an analyst expects a company to pay a $1 dividend next year...

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4, let's imagine that an analyst expects a company to pay a $1 dividend next year and that this dividend will grow 10 percent per year for two more years. After Year 3, the dividend will grow 4 percent per year. The cost of equity is 10 percent(luse 10%,2 use 11% and so on). The value of the stock can be calculated by discounting. Dividend terminal value PV of CFS Total value 1 1 ( ) ( ) 2 1.1 ) 3 1.21 ( ) ) ( 4 ) 4, let's imagine that an analyst expects a company to pay a $1 dividend next year and that this dividend will grow 10 percent per year for two more years. After Year 3, the dividend will grow 4 percent per year. The cost of equity is 10 percent(luse 10%,2 use 11% and so on). The value of the stock can be calculated by discounting. Dividend terminal value PV of CFS Total value 1 1 ( ) ( ) 2 1.1 ) 3 1.21 ( ) ) ( 4 )

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To calculate the value of the stock using the dividend discount model DDM we need to dete... View the full answer