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A firm's earnings and dividends are expected to decline at a constant rate of 3% per...

A firm's earnings and dividends are expected to decline at a constant rate of 3% per year. The most recent dividend (Div0) was $4.7 and the required return on the stock is 11%. The current price of the stock should be $__________.

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Answer #1
As per dividend discount model,
Current price of stock = D0*(1+g)/(Ke-g) Where,
= 4.7*(1-0.03)/(0.11+0.03) D0 Recent paid dividend $         4.7
= $    32.56 g Growth rate in dividend -0.03
Ke Required rate of return 0.11
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