We have the following information of a stock that has;

• Dividend growth rates in the next 3 periods of 11%, 16% and 5% respectively (third growth rate remains forever)
• The company just paid a dividend of $1.265 (D₀=1.265)
• Dividends in period 1 = $1.4, in period 2 = $1.63, in period 3 = $1.7
• The interest rate is 13%

1.Using 1.7 as the dividend in period 3, what is the price of the stock at time 2?

2. What is the price in the current period?

Answer rating: 100% (QA)

We can use the dividend discount model to calculate the price of the stock in each period assuming t... View the full answer