A stock will pay a dividend of $2.00 at the end of cach quarter during the...

 

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A stock will pay a dividend of $2.00 at the end of cach quarter during the coming year. The first quarterly dividend for the year will be paid exactly three months from today. Next year you expect the quarterly dividends to be exactly 5% higher than the quarterly dividends paid this year. In your model you also assume that in all subsequent years the quarterly dividends will be 5% higher than the dividends in the prior year. Assuming an annual effective interest rate of 10%, use the dividend discount model to calculate the price of the stock. A stock will pay a dividend of $2.00 at the end of cach quarter during the coming year. The first quarterly dividend for the year will be paid exactly three months from today. Next year you expect the quarterly dividends to be exactly 5% higher than the quarterly dividends paid this year. In your model you also assume that in all subsequent years the quarterly dividends will be 5% higher than the dividends in the prior year. Assuming an annual effective interest rate of 10%, use the dividend discount model to calculate the price of the stock.