Philadelphia SteelWorks, Inc. has had steady earnings for the last several years and foresees this happening in the near future. However, a new technology that is in the works allows PSW to forecast growth in the next few years. Specifically, the dividends PSW expects to pay in the next three years is $3 per share. Starting in year 4, the company expects to increase this dividend 6% per year indefinitely. What is the stock price of PSW if investors during this time period require a 10% return on their investment?

Answer rating: 100% (QA)

The value of a stock can be determined using the Gordon Growth Model also known a... View the full answer