Business, 07.11.2019 23:31 catwomn

You are considering the purchase of a common stock that paid a dividend of $2.00 yesterday. you expect this stock to have a growth rate of 15 percent for the next 3 years, resulting in dividends of d1=$2.30, d2=$2.645, and d3=$3.04. the long-run normal growth rate after year 3 is expected to be 10 percent (that is, a constant growth rate after year 3 of 10% per year forever). if you require a 14 percent rate of return, how much should you be willing to pay for this stock? a) $89.75 b) $56.46 c) $83.65 d) $62.57

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