Question

The CEO of a company you are following recently announced that, after many years without paying...

The CEO of a company you are following recently announced that, after many years without paying dividends, the company will pay a dividend of $2.50 per share at the end of fifth year from now (t=5), then the dividend is expected to grow indefinitely at a rate of 3.25% per year afterwards. If your required return for the stock is 11%, calculate the expected price at year 2 (t=2)

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Answer #1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

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