Among Homer Simpson's many experiences as an entrepreneur is the time that he started a firm to recycle used grease. The current dividend on this stock is $0.55, and Homer expects that the dividend growth rate will be 7% for each of the next two years, and then will remain steady at 9% thereafter. Given the risky nature of purifying grease, prospective investors require a 15% rate of return if they are to invest in the stock of this enterprise. How much is this stock worth today? Based on the above information, how much should you expect the stock to cost in two years?

Answer rating: 100% (QA)

To calculate the current price of the stock we can use the dividend discount model P0 D1rg D21r2... View the full answer