In order to buy back its own shares, Pennzoil Co. has decided to suspend its dividends for the next two years. It will resume its annual cash dividend of $2.00 per share in 3 years. This level of dividends will be maintained for another year. Thereafter, Pennzoil is expected to increase its cash dividend payments at an annual growth rate of 6% per year forever. Pennzoil's beta is 1.0, the market return is 12%, and the risk-free rate is 5%. What should Pennzoil's stock price be today?

Answer rating: 100% (QA)

To calculate Pennzoils stock price today we will use the dividend discount model DDM which values a ... View the full answer