Stock Valuation using a Dividend Discount Model Roadrunner Enterprises is expected to grow its dividends and earnings
Question:
Stock Valuation using a Dividend Discount Model
Roadrunner Enterprises is expected to grow its dividends and earnings at various rates. The company just paid a cash dividend of $3.00 per share. The company expects to grow its dividend at 13% for the next two years, then at 11% for the following three years,after which the company expects to grow at a constant rate of 9% per year forever.
If the required rate of return on Roadrunner's common stock is 10%, then what is the fair Market Value (FMV)of the stock now?
Please estimate to the nearest penny.
D1=
D2=
D3=
D4=
D5=
P5=
FMV or Fair Market Value now =
If the stock now trades at $75.00 per share, is it rich or cheap?
Financial Management Theory and Practice
ISBN: 978-1305632295
15th edition
Authors: Eugene F. Brigham, Michael C. Ehrhardt