James Consol Company currently pays a dividend of $1.60 per share on its common stock. The company expects to increase the dividend at a 20 percent annual rate for the first four years and at a 13 percent rate for the next four years, and then grow the dividend at a 7 percent rate thereafter. This phased-growth pattern is in keeping with the expected life cycle of earnings. You require a 16 percent return to invest in this stock. What value should you place on a share of this stock?

Answer rating: 100% (QA)

Under dividend discount model price of the share is equal to the present value of future dividend an... View the full answer