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Proctor and Gamble paid an annual dividend of $2.89 in 2018. You expect PG to increase...

Proctor and Gamble paid an annual dividend of $2.89 in 2018. You expect PG to increase its dividends by 7.9% per year for the next five years through 2023. and thereafter by 2.5 % per year. if the appropriate equity cost of capital for P&G is 7.7% per year, use the dividend discount model to estimate its value per share at the end of 2018.

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Answer #1

D0 = $ 2.89

D1 = 2.89 (1+ 0.079) = $ 3.11831

D2 = 3.11831(1+ 0.079) = $ 3.36465649

D3 = 3.36465649 (1+ 0.079) = $ 3.63046435271

D4 = 3.63046435271 (1+ 0.079) = $ 3.91727103657

D5 = 3.91727103657 (1+ 0.079) = $ 4.22673544845

Value of Stock =

=

= $ 72.03

value of Share at the end of 2018 is $ 72.03

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