Target Co is expected to pay $2.4, $2.8 and $2.9 in dividends per share over the next three years. The company’s earnings per share is expected to be $6 in three years of which $2.9 will be paid in dividends. Suppose Target’s stock is expected to sell for 20 times earnings in three years. Given a required rate of return 12%, what should be the current stock price?

What do you expect the price to be next year once the $2.4 dividends per share have been paid? What is next year's stock price?

Answer rating: 100% (QA)

To find the current stock price we need to discount the future dividends and the future stock price ... View the full answer