Suppose you own one share of common stock in Anthony’s Chop Shop, Inc. The firm will pay you a dividend of $1.80 one year from today, and you expect all future annual dividends to grow at 4% annually, forever (i.e., this is an infinite stream of annual cash flows starting with $1.80 the first year, with every cash flow thereafter being 4% larger than the previous cash flow). If the appropriate discount rate is 11%, how much is this share of stock worth to you today (i.e., what is the present value of the stream of expected dividends)?

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The present value of a share of common stock in An... View the full answer