Question

Storico Co. just paid a dividend of $1.85 per share. The company
will increase its dividend by 24 percent next year and will then
reduce its dividend growth rate by 6 percentage points per year
until it reaches the industry average of 6 percent dividend growth,
after which the company will keep a constant growth rate forever.
If the required return on the company's stock is 14 percent, what
will a share of stock sell for today? |

Answer #1

We can calculate the current stock price as follows

Formula used in the excel sheet are as follows:

**So,the price of stock comes out to be $
33.26.**

Hope I am able to solve your concern. If you are satisfied hit a thumbs up !!

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which the company will keep a constant growth rate forever. If the
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Storico Co. just paid a dividend of $3.15 per share. The company
will increase its dividend by 20 percent next year and then reduce
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reaches the industry average of 5 percent dividend growth, after
which the company will keep a constant growth rate forever. If the
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will increase its dividend by 20 percent next year and then reduce
its dividend growth rate by 5 percentage points per year until it
reaches the industry average of 5 percent dividend growth, after
which the company will keep a constant growth rate forever. If the
stock price is $54.50, what required return must investors be
demanding on the company's stock? (Hint: Set up the valuation
formula with...

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which the company will keep a constant growth rate forever. If the
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stock price is $54.50, what required return must investors be
demanding on the company's stock? (Hint: Set up the valuation
formula with...

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