Question: Dropbox stock does not currently pay a dividend but is expected to begin paying one FOUR years from today . That dividend is expected to
Dropbox stock does not currently pay a dividend but is expected to begin paying one FOUR years from today. That dividend is expected to be $1.00 per share. Moreover, the dividend is expected to grow at a constant rate forever afterward, of 2% per year. Investors in Dropbox have a required return equal to 10%. What should investors be willing to pay for the stock TODAY? (Hint: This is a constant dividend growth model. But the next dividend is paid 4 years from today. Don't forget to discount the PV back to t=0)
Step by Step Solution
There are 3 Steps involved in it
1 Expert Approved Answer
Step: 1 Unlock
Question Has Been Solved by an Expert!
Get step-by-step solutions from verified subject matter experts
Step: 2 Unlock
Step: 3 Unlock
